Moscow has refused to extradite Andrei Lugovoi, a former Kremlin bodyguard turned businessman, to stand trial for poisoning Litvinenko with a radioactive substance, saying extraditing Russian nationals runs counter to the Russian Constitution.
The Daily Telegraph said citing a former diplomat "familiar with Russia" as saying that it was "entirely likely" that London could expel a "handful" of middle- and lower-ranking Russian diplomats.
The paper said British officials were bracing themselves for the expulsion of British diplomats from Moscow in response.
The British media reported Wednesday that the Foreign Office planned to present a report on Russia's decision to Parliament next week, which could include proposals to curb cooperation in education, social affairs, trade and antiterrorism.
"We have consistently said that the murder of Mr. Litvinenko is a serious criminal matter. Hundreds of British citizens and visitors to the capital were put at risk. The Russian reply is unacceptable," the daily quoted a Foreign Office spokeswoman as saying.
Litvinenko died last November, aged 44, three weeks after being poisoned at the Millennium Hotel with radioactive polonium-210. He received British citizenship weeks before his death.
Russia said Wednesday it was "perplexed" by the reports. "We are somewhat perplexed by some statements made by London officials," Foreign Ministry spokesman Mikhail Kamynin said adding Russian-British relationship "should not be held hostage to emerging differences and issues."
London has refused Moscow's alternative offer to try Lugovoi in Russia. Downing Street said it "did not have full confidence" that the trial "would meet the standards of impartiality and fairness we would deem necessary."
Lugovoi, who met with Litvinenko on the day of his poisoning, has denied responsibility and claimed in May that he had evidence linking Britain's MI6 to the murder of Litvinenko, who he said was an MI6 agent.
