Vladimir Putin will not be coming to the London Olympics, diplomatic sources have said, in an apparent signal of the Russian president's continuing displeasure and irritation with Britain.

Putin will not attend the London 2012 opening ceremony on 27 July, sources confirmed, despite the fact that Moscow will host the Winter Olympics in 2014 in the Black Sea resort of Sochi. Instead, the Russian president is likely to dispatch his prime minister, Dmitry Medvedev, to London.

The snub follows Putin's controversial decision earlier this month to boycott the G8 summit hosted by the US president, Barack Obama. Putin claimed he was too busy forming his new government to attend, and sent Medvedev instead. He has accused the US of inciting street protests against him and is unhappy with Washington's missile defence plans in Europe.

Putin has a long list of grievances against Britain. As well as the unresolved Alexander Litvinenko affair – a source of smouldering tension – the Kremlin has been infuriated by calls to ban senior Russians accused of human rights abuses.

In March, a group of backbench MPs voted to refuse visas to officials implicated in the death of Sergei Magnitsky, a Russian lawyer who died in prison in 2009. The Foreign Office has so far ignored the non-binding vote and ruled out a Magnitsky ban.

Putin was inaugurated for a third time as president on 7 May. Soon afterwards, he announced that one of Moscow's top foreign policy priorities was to prevent government and other officials from being placed on visa blacklists abroad. Campaigners say visa bans are one of the few effective measures against bureaucrats who enjoy visiting London and other EU capitals and typically hold bank accounts in the west.

On Wednesday, Denis MacShane, the former Labour Europe minister, said he welcomed Putin's decision to avoid the Games. Earlier this year, the MP said Downing Street should make it clear Putin was not welcome at the Olympics.

The threat of Magnitsky sanctions has received "phenomenal coverage" in the Russian press, he said, probably contributing to the decision to stay away. "I think Putin doesn't want to come to Britain and face difficult questions," he said.

He went on: "This is further evidence of the turning inwards of Putin towards a more nationalistic authoritarianism and a rejection of western values. He doesn't want to come to a democratic country and realise how unpopular he now is, because of his refusal to uphold the rule of law and justice back in Russia."

Putin attended the opening ceremony of the Beijing Games in August 2008. At the time Putin was prime minister, having installed his protege Medvedev as president. The ceremony was dramatically overshadowed by events in Georgia, which came under Russian air and artillery bombardment after Georgian troops briefly seized back the rebel province of South Ossetia. Putin and Bush were seen having a heated conversation about who was to blame for the unfolding war.

Since David Cameron's coalition government took over in 2010 there has been a modest improvement in bilateral relations, with foreign secretary William Hague – who was in Moscow on Monday – keen to promote bilateral trade. But Putin remains incensed about Britain's refusal to extradite leading Kremlin critics based in London, including the fugitive oligarch Boris Berezovsky and the Chechen separatist leader Akhmed Zakayev.

There are also major differences on international affairs, with the west exasperated by Moscow's stalwart support for Syria's President Bashar al-Assad and its spoiling role at the UN security council. Russia, for its part, sees US and UK support for Syria's rebels as part of a western-engineered plot to force regime change in Damascus.

Since returning to the Kremlin this month, Putin has kept a surprisingly low profile. There have been none of the stunts or photo opportunities that characterised his election campaign. Kremlin minders are apparently keen to avoid spontaneous – and potentially risky – encounters with ordinary Russians. Street protests in Moscow that began last December continue, with anti-Kremlin activists organising an Occupy-style camp and holding spontaneous mass walks.

Some 120 heads of state have said they will attend the London 2012 opening ceremony. It will be the largest top-level international gathering in diplomatic history, the Foreign Office believes.

The number far exceeds the 87 leaders who travelled to Beijing in 2008. Several controversial leaders on an EU blacklist will also not be coming: they include Assad, Zimbabwe's Robert Mugabe, and Belarus's Alexander Lukashenko.

But other authoritarian rulers not on the list are likely to travel to London. They include Uzbekistan's despotic leader, Islam Karimov, and his counterpart from Turkmenistan, Gurbanguly Berdymukhamedov. Both visited the Beijing Olympics in 2008.