Old Etonian Mr Russell, the great-grandson of former Tory prime minister Stanley Baldwin, is shown relaxing with the future Princess of Wales during a group ski holiday in Val Claret in the French Alps in 1979.
The Daily Mirror, which bought the photo two days after Diana’s engagement to Prince Charles was announced in February 1981, wrote NOT TO BE PUBLISHED in crayon on it.
The photo is now being auctioned in the US.
Oxford student Mr Russell is said to have had a ‘galumphing’ crush on Diana. Nothing, however, happened between them.
According to royal author Andrew Morton, Mr Russell went travelling for a year, and when he returned to the UK in 1980 and told a friend that he liked Diana, he was told: ‘You’ve only got one rival, the Prince of Wales’.
Mr Russell later said he initially thought Diana was a bit of a Sloaney ‘giggler’ but got to like her when both were injured skiing.
He found her ‘bubbly, giggly, but not in a vacuous way, and lacking in self-confidence’.
Youthful: A young Lady Diana Spencer taken before her marriage to Prince Charles
Affection: Lady Diana Spencer receiving a kiss from a friend at a polo match before her marriage to Prince Charles
Mr Russell, who is now a deer farmer in Dorset and married to gardening expert and TV presenter Ali, declined to comment.
The picture shows Diana lying on a bed in a chalet with Mr Russell, who is resting his book on her shoulder. On the window ledge behind them is a bottle of Johnnie Walker whisky.
The identity of the photographer is not known.
The ‘NOT TO BE PUBLISHED’ warning scrawled on the front of the photo perhaps reveals that the Daily Mirror’s picture editor at the time had second thoughts about publishing an image of the future Queen in an intimate pose with another man.
The picture remained in the paper’s archives until it was bought seven years ago by the private Caren Archive, which is now putting it up for sale through RR Auctions in New Hampshire.
Pictured: Lady Diana Spencer would go on to become one of the most photographed women in the world
The 8×10 inch photograph would normally sell for around £750, but because it has the ‘not for publication’ note on the top, the auctioneers expect it to fetch significantly more.
Amusingly, given the innocuous nature of the photograph, it is being marketed as a ‘salacious teenage image of the future princess’.
Eric Caren, owner of the Caren Archive, which is the largest privately owned printed newspaper collection in the US, said he acquired the photograph simply by chance after asking the Mirror group if they would be interested in selling some of their archives.
Mr Caren said: ‘It’s an intimate photo – I don’t know the man in the picture and he could be a friend or a boyfriend.’
Mr Caren added: ‘This would certainly not be the way the Royal Family would have wanted Diana to be presented at that moment, given that two days before her engagement had been announced.
‘The fairytale between her and Charles was still intact at that point.
‘My guess is that it was a privately taken photograph that the Mirror purchased but for some reason did not publish.
‘Why the heck not I don’t know – I don’t know if it was pressure from the Royal family or an internal decision’.
Bobby Livingstone, vice president of marketing at RR Auctions, said: ‘It captures the moment when the engagement had been announced two days before and the press were going mad over Diana – but the Daily Mirror just weren’t going to publish this photograph of her in a comfortable position with a man other than Prince Charles.’
Glamorous: Princess Diana at a concert at Salisbury Cathedral, left, and with Dodi Fayed in 1997
Diana met her future husband in the summer of 1980 and married him the following year.
One of the late princess’s closest male friends at the time, James Colthurst, once recalled going with her on a ski-ing holiday around the time in question.
He said: ‘She slept on the sofa bed. It was fun. There were lots of pranks – Diana was great company – lovely, outgoing and frivolous and she enjoyed practical jokes.’
Bidding will take place over the internet between January 17 and 24.