Dr Andrew Foxall is Director of the Russia Studies Centre at The Henry Jackson Society, a London-based international affairs and security think-tank.

It was all going so well for Vladimir Putin. At the beginning of July, the Russian President was in the driver’s seat. The European Union was divided over whether to impose tougher economic sanctions against Moscow, and the United States was frustrated to find it self leading the Western response to an issue it firmly believed was Europe’s to deal with. In Ukraine, pro-Russian separatists occupied strongholds in the Donbass and vast swathes of the east.

What a difference a month makes. The downing on 17 July– almost certainly by pro-Russian separatists – of flight MH17 changed the international calculus and wrecked over a decade of Kremlin diplomacy in which Russia prevented the West from building a united front by playing divide-and-rule within Europe. That atrocity, which killed 298 innocent people including 10 Britons, led to the West’s “stage three” financial and military sanctions, for which David Cameron was one of Europe’s main cheerleaders.

As recently as March, Britain had been opposed to imposing economic sanctions against Russia. That month, a civil servant was photographed arriving at Downing Street with a crucial document under his arm. It recommended that Britain should “not support, for now, trade sanctions” or “close London’s financial centre to Russians”. But the UK began to talk a good game shortly afterwards – William Hague called in April for “far-reaching economic, trade and financial sanctions” – but, for all the talk, the UK’s position remained unchanged.

Much has been made about the “stage three” sanctions in the UK – politicians and pundits alike have debated their impact on the City of London and London-based oligarchs. Whether or not the sanctions bring any meaningful change in Putin’s behaviour, they will almost certainly lead to a re-alignment of the UK’s relations with Russia, and Whitehall is no doubt already making contingency plans.

Less well-publicised, however, are two other recent developments with equally significant ramifications for London’s relations with Moscow.

First, Theresa May announced an inquiry last month into the 2006 death in London of Alexander Litvinenko, the former Russian spy. At the time, Litvinenko’s murder – almost certainly on the orders of the Russian intelligence services – prompted the near-cessation of British-Russian ties, particularly after Moscow rejected British requests for the prime suspect to be tried in the UK. Although economic relations have improved since, the political relationship never recovered.

Second, an international arbitration court in the Hague has found that Russian officials had manipulated the country’s legal system to bankrupt Yukos, the now-defunct oil producer, and jail its boss, Mikhail Khodorkovsky, a decade ago. The court found that Russia’s actions were politically-motivated and ordered the Russian state to pay $50bn in damages – equal to 2.5 percent of Russia’s total annual economic output – to a group of Yukos shareholders based in Gibraltar. Should Russia refuse to pay, the shareholders will likely pursue Russian assets through British courts.

The murder of Litvinenko and forced nationalisation of Yukos – the chief beneficiary of the company’s collapse was Rosneft, the state-owned oil company – have become defining symbols for many in the West of the brutality of Putin’s Russia.

It may be a coincidence, but after years of delay – the Hague had been considering the Yukos case since 2005, and the UK government had long resisted calls for a public inquiry – these two decisions signal the end of Europe’s attempts to consider its Russia problem in isolation. They also provide ammunition for Putin’s critics. The Litvinenko inquiry, in particular, will seek to establish responsibility for the spy’s death, including whether the Russian state was involved.

Putin will no doubt see the two decisions as further evidence that he is being boxed in by a ‘hostile’ and ‘predatory’ West, and it is in his paranoid moments that the Russian strong man is most dangerous. It is essential, therefore, to engage with Putin diplomatically so as to offer him a way out of the Ukraine crisis – a crisis he in large part created. Such a move would involve an uncomfortable compromise for Western leaders – Kiev may have to adopt Russian alongside Ukrainian as a state language, or Ukraine may have to decentralise power to the regions (something President Petro Poroshenko has suggested he is willing to do). Ultimately, Putin will need to be able to tout his folly to Russians as a ‘victory’.

Whatever becomes of Ukraine, the Litvinenko decision and the likely use of British courts in the Yukos case will roll back most of the progress achieved by successive governments in rebuilding the political aspects of the UK-Russia relationship. But they also suggest that Number 10 may now be ready to pursue a properly calibrated relationship with the Kremlin – one that is based not on secrecy and brute force, but on the rule of law and human rights.