Britain and Russia are heading for the most serious breakdown in relations since the end of the Cold War over the man wanted for the murder of the former spy Alexander Litvinenko.

Western sources acknowledged that the two countries were on “a path to confrontation” after President Putin refused to extradite Andrei Lugovoy to stand trial in London.

Britain is expected to underscore official anger at the Kremlin by imposing punitive measures on Russia within days. Whitehall is preparing for swift retaliation in what threatens to spiral into a tit-for-tat exchange of hostilities that could bring the first expulsion of diplomats since 1996.

Britain is determined to demonstrate to Russia that it will not simply ignore the murder of a British citizen in London with radioactive polonium210, an incident that endangered the lives of hundreds of other people.

Moscow revives history of silencing enemies

Russian exiles have always feared that the Kremlin would try to silence them, wherever they were living and the fears are growing

• New death plot chills relations with Putin

• Reasons to stand firm against the thug Putin

• The face: Boris Berezovsky

Multimedia

• Full video of interview with Marina Litvinenko

BACKGROUND

• Lies and the spies: I must have justice

• Shadowy ex-KGB major takes cover

• Of course the Russians did it. They’re the experts

• The Litvinenko File

• Litvinenko was told that he was marked for death

Russia seems equally determined to face Britain down. The Foreign Ministry said yesterday that it was very surprised by London’s reaction and urged Britain not to hold the relationship hostage to the Litvinenko case.

Mikhail Kamynin, a government spokesman, said that Moscow had rejected Britain’s request to hand over Mr Lugovoy in line with Russian law, which includes a constitutional ban on the extradition of its citizens to face trial abroad.

The British Council is already coming under pressure from Russian authorities. Russia’s main state television channel focused on its activities in a documentary on Sunday about alleged British espionage.

Britain and Russia last expelled each other’s diplomats in May 1996. Moscow ordered nine British embassy officials to leave, claiming they were running a spy ring, and London hit back by throwing out four Russians.

Mr Litvinenko, who became a British citizen shortly before his death, was a dissident former agent with the Russian Federal Security Service and a vocal critic of Mr Putin. In a dramatic deathbed statement, he accused the Russian President of ordering his murder. Mr Lugovoy is a former KGB bodyguard who met Mr Litvinenko at a London hotel on November 1, the day that he fell ill. The Crown Prosecution Service named him in May as the man wanted for the murder of Mr Litvinenko.

The stand-off is the first big test for the new Foreign Secretary, David Miliband, who must balance a tough stance with the Kremlin against potential damage to British business interests in Russia’s booming economy. Mr Miliband said that he would treat the refusal to extradite Mr Lugovoy “with the seriousness which it deserves”.

British officials are adamant that Mr Putin could find a way to extradite Mr Lugovoy if he wished to. They regard recent allegations of British spying operations in Russia as a Kremlin effort to muddy the waters surrounding the case. Britain rejected a trial of Mr Lugovoy in Russia or in a third country, saying that London was the only appropriate place to try the case.

Mr Lugovoy insists that he is innocent. Last month he accused the British Secret Service and the exiled billionaire Boris Berezovsky, one of Mr Putin’s fiercest critics, of involvement in the murder. Mr Berezovsky, who employed Mr Litvinenko in London, dismissed the allegation.

Times Recommends

• Times Charity Appeal: SolarAid
• Is it Black Monday all over again for Dubai?
• Behind the scenes at the biggest deal