stratfor.com: U.K., Russia: The Continuation of the Great Game

Summary

The Russian government is expected to respond to the United Kingdom’s expulsion of four Russian diplomats — which itself was a reaction to Moscow’s refusal to extradite the key suspect in the poisoning death of former Russian intelligence agent Alexander Litvinenko in London. Speculation is running rampant over what the next moves will be and whether the poisoning of a former agent will lead to a break in business between Russia and the United Kingdom. However, while each country is maintaining its pride and acting against the other, neither will allow the situation to degrade into anything beyond typical Cold War games.

Analysis

The Russian government is expected to respond July 17 to the expulsion of four Russian diplomats from the United Kingdom — which itself came in retaliation for Moscow’s refusal to extradite the key suspect in the poisoning death of former KGB agent Alexander Litvinenko in London. Russian and British media have been hanging on this story since Litvinenko’s Nov. 23, 2006, death from radiation poisoning. But now, with each government working to take real steps against the other, concerns are growing about just how far British-Russian relations will deteriorate.

Though the autopsy has not been published, British Foreign Secretary David Miliband gave a detailed account July 16 during a meeting in London of how Andrei Lugovoi killed Litvinenko. Last week, Russian officials notified British prosecutors that Moscow was refusing to extradite Lugovoi because the Russian Constitution says Russian citizens cannot be handed over to other countries. This reaction was expected, as were Moscow’s counteraccusations that the United Kingdom had refused to extradite exiled oligarch Boris Berezovsky and Chechen leader Akhmed Zakayev, both of whom have political asylum in the United Kingdom.

Continuing the tit-for-tat, London expelled four Russian midlevel diplomats July 16 and is considering visa restrictions for Russian government workers. Russian Duma Foreign Affairs head Konstantin Kosachyov said the United Kingdom’s moves are in violation of the 1961 Vienna Convention on Diplomatic Relations, and that he “could not remember a state expelling foreign diplomats as a form of punishment.”

However, the United Kingdom and Russia have a long history of these sort of spats. Each side has expelled the other’s diplomats — in 1971, 1985, 1996 and now — amid countless intelligence sagas like the British “spy rock” scandal in 2006. The espionage game never ceased between Russia and the West, but the West’s attention turned to other threats, such as the war against jihadists. Western fear of Russian intelligence’s reach into other countries has increased in the past few years, however, as Russia has started reasserting itself.

Russia has reminded the West that it is still around with new missile threats, the elimination of key security treaties and increased meddling outside its borders. Now, the term “new Cold War” is being thrown around pretty frequently in the press. Poisonings, diplomatic expulsions and missile threats were all tactics that the Soviets used against the West, so such actions are expected to be seen again as Russia and the West fall into their former roles.

And risks are not limited to the world of espionage. Both Russia and the United Kingdom have been quick to make assurances that ongoing investment agreements between the two countries will remain intact despite rising tensions between London and Moscow. Unlike government agencies and embassies, private organizations and investors have much less diplomatic and legal protection from either the United Kingdom’s restriction efforts or Russian security services. Investors are already showing their nervousness; shares of Russian companies traded on the London Stock Exchange (LSE) fell between 0.3 percent and 4 percent on news of the British measures against Russia.

There are 42 Russian groups listed on the LSE and the junior Alternative Investment Market exchange, with a combined worth of roughly $550 billion. The United Kingdom is Russia’s largest foreign investor; British investment in Russia includes ventures from companies such as BP, Imperial Energy Corp. and Royal Dutch/Shell, as well as interests of more than $68 billion. However, the only financial ties that would feel an official hit from a British-Russian spat would be direct aid or foreign direct investment (FDI) — and FDI from the United Kingdom to Russia is only around $14 billion, while London no longer gives Russia direct aid.

But neither Russia nor the United Kingdom is interested in pushing the Litvinenko affair to the point where investors would be scared off, as doing so would hurt both sides. Both countries just want to flex their muscles enough to show that they will not ignore situations like the Litvinenko affair. It would be an extreme step if either country restricted investment in the other. Such restrictions also do not go along with the tactics London and Moscow typically use. But expelling each other’s diplomats is a line both are content to draw without escalating the situation beyond a simple reminder that the “Great Game” continues.

July 17, 2007 19 24  GMT

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