Theresa May, U.K. prime minister, leaves number 10 Downing Street to listen to the Spring Statement in Parliament in London. 9Photographer: Simon Dawson/Bloomberg)

May Plots to Punish Russia as Crisis Over Poisoned Spy Deepens

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(Bloomberg) -- U.K. Prime Minister Theresa May will set out how she aims to retaliate against Russia over the nerve agent attack on a former spy and his daughter, deepening tensions between Vladimir Putin and the West.

May will meet with her national security and intelligence chiefs Wednesday to assess whether Russia has given a credible answer to her charge that it was behind the poisoning of Sergei and Yulia Skripal in Salisbury, southwest England. She will then update Parliament on her response.

Putin’s officials rejected May’s ultimatum to account for the attack by midnight Tuesday and warned her there will be repercussions if she acts against Russian media or diplomats based in London.

Tom Tugendhat, chair of Parliament’s Foreign Affairs Committee, told Bloomberg Television “what we have to do now is to stand firm and make sure he’s exposed for what he is: which is a thief, a liar and a warmonger.”

The crisis is a key test for May as she navigates Brexit and for the wider Western alliance in how it responds to Putin on the eve of Russian elections. On Tuesday President Donald Trump said he backed her “all the way.” May will set out her next move Wednesday.

Russian markets continued to shrug off the spat with the U.K. and the prospect of new sanctions. It remains to be seen what May can do -- outside obvious measures like diplomatic expulsions -- that can be surprising and hit Russia hard. Investors polled by Bloomberg said the standoff is unlikely to affect appetite for Russian assets, or demand for a Eurobond sale planned this month.

Skripal, once an informant for Britain’s foreign intelligence service, and his daughter were found unconscious on a park bench a week ago. A police officer who was on the scene is in serious condition in hospital. The military-grade nerve agent used in the attack, called Novichok, was developed by the Soviet Union in the 1970s and 80s.

‘Stand as an Alliance’

The 66-year-old spied for the U.K. for a decade, beginning while he was working for Russian military intelligence. He was sent to Britain in 2010 in a spy swap. In a state-television documentary released Sunday, Putin said he can never forgive treachery.

The assassination attempt is sensitive for the U.K. because the country has historically been loath to take substantive measures against Russia for attacks on its soil. Its response to the 2006 murder of Russian Alexander Litvinenko, for instance, was widely derided as toothless.

On Tuesday, Foreign Secretary Boris Johnson spoke to NATO Secretary General Jens Stoltenberg, who agreed that the alliance must unite in response, the U.K. said.

“They both agreed that Russian actions repeatedly threaten the security of NATO partners – from the Baltics, Balkans, Ukraine and Georgia – and NATO must stand as an alliance to call out Putin’s behavior,” the British Foreign Office said. The U.K. will brief the North Atlantic Council on the crisis Wednesday.

Second Counter-Terror Probe

Separately, U.K. police said they are investigating the death of a man in New Malden, southwest of London. The probe is being conducted by counter-terrorism officers “as a precaution because of associations that the man is believed to have had,” police said. The Guardian newspaper identified the man as Nikolai Glushkov, a 68-year-old Russian exile.

Since blaming Russia on Monday for the attack on Skripal, May has made a series of calls to allies. German Chancellor Angela Merkel on Tuesday told May she took the U.K. government’s assessment of an alleged Russian role in the Salisbury attack “very seriously" and pressed Russia to provide answers. May’s office said Merkel “said she stood in full solidarity with the U.K.”

Before he was fired Tuesday, U.S. Secretary of State Rex Tillerson branded Russia an “irresponsible force of instability in the world” and said those who ordered and carried out the crime must face consequences.

One U.K. government aide, speaking on condition of anonymity, said the possible responses were a choice between those May could talk about and those that would be effective. The second category is likely to include cyberattacks against Russia.

Expulsions, Cyberattacks

While not made public, Britain’s capacity in the area of “offensive cyber” was summarized in December by Parliament’s Intelligence and Security Committee, which can access high-level security personnel and highly classified material. Potential targets could include hacking or attacks on wider infrastructure.

Speaking about cyber security in December, Britain’s national security adviser Mark Sedwill said if Russia launched a cyber attack, the government would likely respond using its own weapon of choice rather than a tit-for-tat online exchange. 

In the category of responses the prime minister can speak about publicly, there’s little the U.K. can do alone. Russia expects diplomatic expulsions, but pan-national sanctions would involve months of lengthy negotiations with other countries. More drastic measures such as cutting Russian banks off from SWIFT, a global messaging system that facilitates the transfer of payments between thousands of banks, are unlikely, one person close to the Kremlin said.

Read more: Trump Tells U.K. That U.S. With Britain Over Poisoned Ex-Spy

Britain hasn’t been in touch with SWIFT and, in any case, the organization wouldn’t disconnect banks unless EU members decided unanimously to impose sanctions and directed financial messaging providers to isolate a national banking network, as happened with Iran in 2012.

Several EU states are seeking a joint response, according to an EU official, who asked not to be named as no decisions have been taken yet. EU foreign ministers will discuss the incident when they meet in Brussels March 19, the official said.

May does have some leverage, even alone, if she targets those close to Putin who have unexplained wealth in the U.K. There’s an “extraordinary number’’ of Russian officials who use the U.K. education system, live in London’s expensive districts and have made their homes in the city, sometimes dubbed Londongrad, according to James Nixey, head of the Russia and Eurasia program at London-based think tank Chatham House.

“It’s a game of chicken between Russia and the West,” Nixey said. “Who will blink first?”

©2018 Bloomberg L.P.

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