Russia warned Britain tonight its decision to expel four Russian diplomats over the murder of Alexander Litvinenko would have "the most serious consequences".

The Cold War-style expulsions - the first in a decade - were announced in an emergency Commons statement this afternoon by David Miliband, the Foreign Secretary.

Mr Miliband also told MPs that the Government had suspended negotiations on simplified visa rules and was reviewing bilateral cooperation on a range of other issues because of Moscow's "extremely disappointing" decision not to extradite the chief suspect, former KGB officer Andrei Lugovoy.

"This is a situation the Government has not sought and does not welcome. But we have no choice but to address it," Mr Miliband said."We have chosen to expel four particular diplomats in order to send a clear and proportionate signal about the seriousness of this case."

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The initial Russian reaction stopped short of tit-for-tat expulsions - but they may not be long coming. At an impromptu briefing in Moscow, a Foreign Ministry spokesman, Mikhail Kamynin, called Britain's decision "immoral".

"They should understand well in London that the provocative actions conceived by the British authorities will not go unanswered and cannot fail to produce the most serious consequences for Russian-British relations as a whole," he added.

British prosecutors allege that Mr Lugovoy, a Moscow businessmen, fed Litvinenko polonium-210, a poisonous radioactive isotope, in a pot of tea in a Mayfair hotel on November 1 last year.

Traces of the substance were found at around a dozen other sites in London, including three hotels, a stadium, two planes and an office building

Mr Litvinenko, also a former KGB officer who had become a fierce critic of the Kremlin over its campaigns in Chechnya, died on November 23 after a dramatic deathbed statement in which he accused President Vladimir Putin of being behind his killing. He had become a British citizen shortly before he was poisoned.

The Crown Prosecution Service announced its decision to seek Mr Lugovoy's extradition on May 22, but the request was formally turned down by Russia a week ago.

Mr Miliband said: "The Russian Government has failed to register either how seriously we treat this case or the seriousness of the issues involved, despite lobbying at the highest level and clear explanations of our need for a satisfactory response."

Not only had Mr Litvinenko suffered a "horrifying and lingering death in front of his family", he said, but hundreds of others had been put at risk of radiation as well.

"Given the importance of the issue and Russia’s failure to cooperate to find a solution, we need an appropriate response," he told MPs.

The expulsions marked the depth of British concern at the Litvinenko murder. It is not clear what other cards Mr Miliband has left to play if only because the economic deck appears stacked firmly in Russia’s favour.

Foreign investment is flooding into Russia and is forecast to be $70 billion this year, compared to $42 billion in 2006 with British companies at the forefront. The strength of British investment is in spite of the uncomfortable experiences of Shell and BP in being forced by the Kremlin to cede control of key oil and gas projects to state-owned Gazprom.

British firms invested $5.5 billion in Russia last year, making it the largest foreign investor. Russia received $3.1 billion in direct British investment in the first three months of this year alone, almost nine times more than the $364 million invested by US companies.

According to the British Embassy in Moscow, the visa review will affect officials and not ordinary Russians. The embassy now issues 700 visas per day to Russians seeking to visit Britain, up 25 per cent on this time last year.

Russian companies have made the London Stock Exchange their chosen home for stock flotations. They raised $30 billion in initial public offerings (IPO) last year and floats worth at least $40 billion are expected to be concluded in 2007.

The $8 billion flotation of VTB, Russia’s second-largest bank, in London in May was the largest global IPO so far this year. London has handled all six international IPOs by Russian companies so far this year, worth $12.2 billion.

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