* "Gay propaganda" law criticised before Sochi Olympics
* Sochi relatively tolerant but gay scene in decline
* Many gay people have left for other countries
By Thomas Grove
SOCHI, Russia, Dec 17 (Reuters) - At the Mayak Cabaret, one of the few gay clubs in Russia's Olympic city of Sochi, the nightly drag show starts with a drum roll before a performer in a brunette wig lip synchs "Diamonds Are a Girl's Best Friend."
But when the show is over at one of the last landmarks of a once vibrant gay scene in Sochi, the lights fall on an audience made up mostly of straight couples who came for the novelty.
Sochi's gay scene has been shrinking since Russia won the right to host the 2014 Winter Games, and the decline has continued since President Vladimir Putin signed a law this year banning the spread of "gay propaganda" among minors.
The new law has focused attention on Sochi, which will host many foreigners as well as Russians during the Olympics. Some gay activists question its legality and others have called for a boycott of the Games in protest.
Many members of the city's lesbian, gay, bisexual and transgender (LGBT) community have left the country. They worry Sochi's reputation as a city of tolerance will decline further.
"There is no gay community here. It's a myth," said Roman Kochagov, who co-owns Mayak.
"The number of gays has dropped for years. Every year there have been fewer and fewer ... now they have almost all disappeared," he said, adding that he himself is looking to leave the country.
He says on any given night only a third of his customers are gay men, far fewer than when he opened the club nine years ago.
Putin's increasingly conservative social agenda in his third term as president has boosted the role of the Russian Orthodox Church, whose leader has suggested homosexuality is one of Russia's biggest threats, and given more air time to anti-homosexual rhetoric on media outlets.
Kochagov and his partner Andrei Tanichev opened Mayak in a darkly lit one-storey building on a promenade overlooking the Black Sea. They had finished a successful run with a gay hotel and wanted to try something more ambitious.
At Mayak they employ singers and dancers - all men - and Kochagov says he draws a profit every night from crowds among the city's well-heeled who prefer to avoid the resort's tourist bars. By Russian standards, the city has a marked liberal feel.
"People here don't care who I sleep with. I walk down the street with my boyfriend, people may know I'm gay, but no one pays any attention," said Marcel Aflin, 30, who worked in the northern oil city of Salekhard to earn money to come and enjoy the sun and the beach of Sochi.
But Sochi is much less tolerant than many Western European cities. Many in Sochi's gay community have left, lured abroad by the gay scenes in cities such as Berlin or Barcelona.
During Soviet times, Sochi had gained a reputation for tolerance, especially after it became a top tourism spot at a time when Soviet regulations stipulated that husbands and wives must vacation away from each other and their children.
The city became the background for many summertime romances among married and unmarried people.
Health spa regulations also demanded that visitors were divided by sex and that strangers were put up in the same room during their stay in the region, which became a Soviet playground in part due to late dictator Josef Stalin's affinity for its warm weather, hot springs and seashore.
Homosexuality, which was a crime in the Soviet Union, was decriminalised only in 1993. By the time the Soviet Union crumbled, however, Sochi's beaches had earned a reputation as a place for gay men to pick up partners.
"Many, many gay men know about it and went there," said David Tuller, who wrote a book about gay life in Russia which was published in 1996.
"It always had a reputation as a city where you could go and cruise on the beach," he said.
Kochagov says that like Moscow's Bolshoi Theatre, which was a landmark for gay people to meet potential partners during the Soviet era, Sochi had its own meeting spots, such as the gay beaches that dotted its Black Sea coastline.
One in front of the hotel Sputnik was the best place to meet other gay men, he said.
Now locals say they can feel Putin's increasingly conservative political course, which has galvanised his support among more traditional parts of the country.
The nationwide bill that outlaws gay "propaganda" gives little detail on what exactly is banned and gay activists fear the possible proximity of children could be used to ban gay rights rally or even punish displays of affection.
Holding hands or kissing a same-sex partner in public, they say, might be enough to be hit with a fine equivalent to $170.
Russian lawmakers say the law is a reflection of the country's social mores, and that it is needed to protect minors. Putin has condemned gay unions for failing to produce children as Russia battles a demographic crisis.
But the legislation has brought calls for a boycott of the Olympics from activists such as British comedian Stephen Fry, who visited Russia this year to draw attention to the bill.
Gay activists have also asked International Olympic Committee chief Thomas Bach to launch an investigation into the Russian law and the implications it would hold for visitors during the Olympics.
Russia's sports minister, Vitaly Mutko, said this month that the government should have waited until after the Games to implement the law banning gay propaganda. "It would have been possible to calculate what kind of reaction this would have caused in the West, especially on the eve of the Olympics," he said in an interview with business daily RBK.
In an attempt to burnish Russia's image ahead of the Games, Putin has warned Russians against homophobia and said gay people would be welcome in Sochi during the Olympics.
Many in Russia's gay community say the law sends out a signal for people to single them out for discrimination and in some cases violence.
The building housing the Mayak Cabaret has only one outside light, shining over a brown steel door and doorbell. Except for the music that it pumps out after 10:00 p.m. every evening, it is barely recognisable as a club.
Youths who have learned it is a gay club have ripped the sign off so many times, Kochagov said, that he has stopped putting it back up.
Fights sometimes break out between his customers and clients of a working-class bar next door, but the level of violence barely compares with what high school student Vladislav Slavsky says he puts up with on a regular basis.
Slavsky says other students at his school have thrown stones and spat at him. He says vigilantes once tried to "cure" him of his homosexuality by pouring urine and sewage on him.
"It's happened so often now that when I go to the police they just sneer and say they can't be my personal bodyguard," he says, eating sushi in a central Sochi restaurant.
Reflecting common attitudes to gay people in Russia, his high school psychologist also said his homosexuality had to be cured and asked him if he had been raped as a young child.
"Can you imagine waking up every day in the city that you were born, walking the same streets you have walked your whole life but where you still, after all this time, feel like a stranger?" he said. (Editing by Pravin Char)