After several days of uncertainty, Dmitry Kovtun failed to give evidence via video link from Moscow to the inquiry at London's High Court by a 1000 GMT deadline set by its chairman.
Underlining his absence, the video link to Moscow was briefly activated, showing an empty chair.
"That would seem to make the situation crystal clear," Robin Tam, one of the inquiry's lawyers, told the court.
Kovtun and a second Russian, Andrei Lugovoi, are wanted by British police for allegedly poisoning Kremlin critic Litvinenko in a London hotel on November 1, 2006 using tea laced with polonium-210, a radioactive isotope.
The inquiry received the first indication on Friday that Kovtun may not give evidence but gave him time over the weekend to change his mind.
The businessman said he would be committing an offence under Russian law if he testified unless he secured permission from authorities in Moscow.
"I will not be able to give testimony today, tomorrow or the day after tomorrow," Kovtun told Russia's Interfax news agency yesterday.
The Litvinenko inquiry started its hearings in January and is due to hear closing submissions this week.
It is due to report its findings by the end of the year.
Robert Owen, the high court judge who chairs the inquiry, said he was determined that it should not be "further disrupted".
"This unhappy sequence of events drives me to the conclusion either that Mr Kovtun never in truth intended to give evidence and that this has been a charade," he said.
"Alternatively, if he has at some stage been genuine in his expressed intention to give evidence, obstacles have been put in the way of his doing so.
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