A number of Russian media sources claimed late on Thursday that the diplomat in question, Christopher Bowers, had been named by a security source as high-ranking member of the British intelligence service.
A Foreign Office spokeswoman said that, "I can confirm that a member of the British staff is suspected of spying by the Russians. He is the acting director of UK Trade and Industry. However, we do not comment on intelligence matters."
The source also said that Bowers had fallen under suspicion due to meetings with members of human rights activists from Russia's North Caucasus region, which includes Chechnya. He was also accused of having worked undercover while a BBC reporter in Uzbekistan.
However, Russia's Federal Security Service (FSB) declined to make an official comment.
The development is the latest in a long-lasting row between Moscow and London. Relations between the two countries have plunged to a post Cold War low since the murder of Russian security service defector and Kremlin critic, Alexander Litvinenko, in London in 2006. Moscow has refused to extradite Andrei Lugovoi, London's main suspect in the case, citing its Constitution. Unnamed British security service sources recently claimed that the Russian authorities were involved in Litvinenko's death.
The Litvinenko row also led to the tit-for-tat expulsion of diplomats last year, with then-Russian president, Vladimir Putin, stating that, "Britain forgets it is no longer a colonial power and that Russia was never its colony."
The Russia Foreign Ministry said in March that tensions between the two countries had been worsened by the "anti-Russian activities" of Chechen separatist emissary, Akhmed Zakayev, and tycoon Boris Berezovsky, both of whom have been granted political asylum by Britain.
The closure of British Council branch offices in Russia also contributed to rising tensions.
Media sources in Britain have suggested the latest development may be linked to Bower's dealings with the Russian-British joint oil venture TNK-BP in his role as the British embassy's senior trade official. TNK-BP's British and Russian shareholders are currently embroiled in a dispute over strategy, management, and control of the company.
In March, the FSB charged one of TNK-BP's Russian employees of spying for foreign companies.
