Chess: The opening moves went well. But the battle to find an undisputed king of world chess ends in stalemate

For the game that has challenged generations with the Open Sicilian and the Helsinki Hedgehog, it is the ultimate proof that chess is dominated by titanic egos and big business - the Prague Débâcle.

Exactly 12 months ago, the leading figures in world chess put their signatures to an agreement in the capital of the Czech Republic to end a decade of bitter schism at the highest level of the game.

Yesterday, that accord lay in tatters after one of two showpiece matches designed to reunify the world's top two chess championship titles was cancelled amid recriminations over a lack of money for the $1m (£620,000) purse - and war in Iraq. The Classical World Chess Championship (CWCC) between the world champion, Vladimir Kramnik, and a young Hungarian challenger, Peter Leko, had been due to take place in Budapest next month, at the end of a year of painstaking preparation. But the London-based entertainment group that had bought the rights to the event announced this week that it had failed to find a sponsor and cancelled the match.

Einstein Group, whose rights to the CWCC expire at the end of June, blamed the conflict in Iraq for scuppering its plan to stage the match in the Middle East and economic instability for a lack of financial support.

In a statement, the company said: "Combined with underlying international economic anxieties, the Iraq war effectively undermined global commercial confidence to the point that no potential sponsor was willing to commit sufficient funds towards this match for us to feel secure in proceeding."

The result is the potential ending of the ceasefire between the two rival camps in world chess and a behind-the-scenes battle for control of the game, which belies its reputation as a spectator sport of being a poor second to watching paint dry - and makes the complexities of the Berlin Defence or Kiev Gambit seem uncomplicated by comparison.

The split started in 1993 when Garry Kasparov, the mercurial genius rated as the world's best player, broke away from the World Chess Federation. The federation, known by its French initials as Fide, is controlled by a maverick billionaire, Kirsan Ilyumzhinov, who is also president of an impoverished former Soviet republic, Kalmykia, and is known to admire Saddam Hussein.

Kasparov's breakaway body, the Professional Chess Association, folded in 1998 but led to a succession of other splinter groups that the Prague Agreement was designed to resolve.

In an arrangement more reminiscent of the horse trading in international boxing than the sedate world of rooks and kings, the accord proposed two preliminary matches between the top players of the CWCC and Fide to culminate in a reunification bout in November. The Fide preliminary match, also with a purse of $1m, is due to take place in Argentina next month between Kasparov, who was born in Azerbaijan, and a 19-year-old Ukrainian prodigy, Ruslan Ponomariov.

For chess fans, that had set up the tantalising prospect of a grand finale between Kramnik, 28, whose reserved efficiency earned him the sobriquet of the Steve Davis of chess, and Kasparov, 40, the Beast of Baku renowned for laughing at his opponents, who has been demanding a rematch ever since losing his world title in 2000 to Kramnik - his former pupil.

In an example of the depths of the chess schism, Fide refused to recognise the Kasparov vs Kramnik match despite both men being the two top players in the world according to its own rankings.

Kasparov, who now lives in America (and, confusingly, has rejoined forces with Fide), has long wanted to free chess from the paradox that dogs its progress: despite being the world's second-largest participation "sport" with 180 million players, it attracts less coverage than tiddlywinks.

Speaking recently, he said: "We need to be more organised. Chess has to widen its audience. The image of the game needs to change from that of a gloomy, smoke-filled corner café where some crazy people play to the one I promote of a physically fit guy who plays chess but might also play for the local soccer team."

It is a scenario that yesterday seemed a distant one.

There was confusion about the future of Fide's match next month amid rumours it too had been unable to secure sufficient sponsorship for its showpiece event in Buenos Aires.

Officials at the Swiss headquarters of Fide insisted yesterday that the funds had been secured and the match would proceed. For several weeks they had refused to deny rumours to the contrary. A spokeswoman said: "We will be issuing a statement later this week to make matters clear."

It is understood that the match will be postponed until November - the original date for the Fide/CWCC reunification match, which could be postponed indefinitely by yet another round of jockeying for position among grand masters.

Carsten Hensel, the agent who represents both Kramnik and Leko, refused to discuss their CWCC contracts but chess experts pointed out that Kramnik, in particular, was likely to be a free agent when the Einstein Group's licence runs out on 30 June.

In turn, Fide - whose Latin motto Gens Una Sumus translates as We Are One Family - and Mr Ilyumzhinov could be in a position to exert a dominant position over world chess.

To the considerable surprise of the chess fraternity, Fide scored a coup last year when Kasparov left a breakaway alliance with Kramnik and several other grand masters to rejoin the federation.

Mr Ilyumzhinov, a banking billionaire who was elected president of Kalmykia on electoral promises that included a free mobile phone for each of its inhabitants, has lavished money and attention on chess, spending at least £22m of his money on the game, including prizemoney and a purpose-built chess centre in Kalmykia's capital, Elista.

He also had a long-standing relationship with Saddam Hussein and visited Iraq on the eve of the Anglo-American invasion in March this year. Mr Ilyumzhinov denied that the visit was to offer asylum to senior member of the regime. Some within international chess said that they feared the latest developments would make Fide unassailable and pull out of the Prague Agreement altogether.

One senior player, who declined to be named, said: "They've got Kasparov back, they can probably tempt Kramnik so the purpose of Prague has been undermined. It looks like Fide has won and we can forget about unification."

For the British Chess Federation, such a result would be disastrous. David Levens, the federation's head of marketing, said: "We are trying to get away from this image of the game being played by intellectual nerds who sit in their ivory towers.

"What we have instead is people who, for all their intelligence, can't see far enough ahead to realise the damage their moves are doing."

The Rival Champions

VLADIMIR KRAMNIK

Born: Tuapse, Russia, 1975

Early career:

Began playing aged four. Won first adult championship in his home town at seven. Accepted into the school of the legendary Mikhail Botvinnik at the age of 11.

International record:

Youngest player to represent Russia in the Chess Olympiad in 1992. Wrested the world title from Kasparov in 2000. Ranked second in the world, behind Kasparov, in the Fide listings.

What they say about him:

Upholds the classical tradition and beauty of the game. Capacity for hard work at the board and laid-back objectivity make it almost impossible to break through his concrete chess.

GARRY KASPAROV

Born: Baku, Azerbaijan, 1963.

Early career: Won the Soviet Junior Championship aged 12, the youngest to do so in the history of this competition. Went on to become the youngest ever World Chess Champion.

International record: The world's number-one player since 1984 according to Fide. In 1990, he was the first player in history to break the 2,800 ELO ratings mark - the chess equivalent of the four-minute mile.

What they say about him: Botvinnik said of the 11-year-old Kasparov: "The future of chess lies in the hands of this young man." Regarded as the greatest champion ever.