Jeremy Warner's Outlook: The terrorists can try their damnedest, but the Bank of England, for one, won't be moved

By the time the meeting closed, it would already have been obvious to assembled MPC members that the country was dealing with a major terrorist attack, possibly the worst ever on British soil. Would the correct response have been to cut interest rates there and then, as the US Federal Reserve did in the immediate aftermath of 11 September? With consumer confidence on its knees and the economy slowing fast, rates were expected to fall over the next two to three months in any case, so why not just get on with it?

The obvious danger is that it would have seen as a panic reaction to events. Times of crisis require cool heads, and in the confusion of the moment it is easy to overreact. It is often better to do nothing at all than be panicked into disproportionate action.

The evidence of the terrorist atrocities in New York and Washington is that the effect of these events on the overall economy is much more limited than first assumed. In the case of the Madrid outrages, to which these latest events are more obviously comparable, there was hardly any long term impact at all. As for 9/11, America was already slipping into recession when al-Qai'da struck. The one-week hiatus in economic activity that occurred in the wake of the attacks can't have helped, but it is arguable as to whether it caused the subsequent recession.

Indeed, by persuading the Fed to act in pushing through much deeper and earlier cuts in rates than might otherwise have occurred, the attacks could paradoxically have lessened the scale of an already established downturn.

I don't want in any way to belittle the scale of yesterday's atrocities, but they are plainly not of the same order of magnitude as the US attacks, either in terms of shock, loss of life, damage caused, or likely long-term impact. There had never before been a major terrorist incident on American soil. Off and on, Britain has had 30 years of them.

Among Londoners, there was an almost fatalistic attitude to yesterday's events. The London transport system has long been thought a likely target for terrorists. For many, it was only a question of when. As for the damage and disruption, this will of itself be of only limited economic impact.

The more pervasive effect comes, as in the wake of 11 September, in the costs of heightened security, and the effect this has on speed of movement and business activity. The elation and pride of the day before, when London learned it would be hosting the 2012 Olympic Games, is replaced by a climate of fear and anxiety.

Airline travel in the US, if not internationally, has only recently recovered to pre-11 September levels. It's plainly more difficult, if not outright impossible, to police mass transit travel to the same degree as airports, so the long-term effect on commuter traffic could be more serious still.

For some, the fear of travelling by tube and bus will be hard to overcome. The chances of being caught up in a terrorist attack on the Tube are still a great deal less than many other life threatening occurrences. Yet people don't behave rationally after such an event.

The collective psychological impact of a major terrorist incident, as well as the response to it, tends to be out of all proportion to the direct damage done or the loss of life caused. This too can have a sizeable economic effect. If fewer people are travelling into London because they fear for their lives in using public transport, less money is spent in the capital, and some traders might struggle to survive. The costs of enhanced security place still further burdens on business.

Memories are surprisingly short, and it may be that things get back to normal quite quickly. Londoners are a resilient and stoic lot who are unlikely to let these terrible events affect them unduly. Yet policy makers would be unwise to count on it, and although the Bank of England was undoubtedly right to think the atrocities should have no bearing on the immediate interest rate decision yesterday, if these events further undermine already fragile consumer confidence, then the MPC may have to act sooner and more trenchantly than it would have liked.

By the close of play yesterday, a near 4 per cent fall in the FTSE 100 had been trimmed to less than half that. In characteristically clinical fashion, markets have made their judgement: yesterday's events might have brought London to a standstill, as well as revealed some serious failings in our security services, but the long-term economic and commercial impact is likely to be negligible. Whether that judgement is correct remains to be seen.

Now Shell dances to Russia's tune too

BP has taken the direct route into Russia, buying a half stake in the country's second biggest oil company TNK, with all the risks and rewards which that entails. Shell, on the other hand, has opted for the more cautious, piecemeal approach of acquiring stakes in particular projects, notably the giant Sakhalin-2 development off the Siberian coast, where the biggest threat it faces is from environmental activists worried about the fate of the grey whale.

Yesterday Shell announced it was trading just under half of its interest in Sakhalin, the biggest liquefied natural gas field in the world, for a 50 per cent stake in the as-yet undeveloped Zapolyarnoye field in western Siberia, owned by the state-run Russian gas concern Gazprom.

There are two ways of looking at the deal. Either the Kremlin decided that Sakhalin was just too juicy a prospect to be left entirely to foreigners, and in effect pushed Shell into doing a deal with Gazprom. Or there is Shell's version of events, which is that it had always wanted a Russian partner to work alongside it in Sakhalin and what better way to achieve that than with an asset swap which takes the company squarely into the heartland of Russia's oil and gas industry, western Siberia?

Until the terms of the swap are clear, in particular the amount of cash and additional assets which Shell will receive to compensate it for the superior value of Sakhalin, it won't be possible to tell how good a deal Mr van der Veer has achieved. If he has been short-changed, then it would suggest that the first explanation for the deal is nearer the mark.

BP has so far confounded those critics who said it would get badly mauled by choosing to dance with the Russian bear. TNK-BP does not remotely look like becoming a re-run of Yukos and as long as the Russian oligarchs Lord Browne has jumped into bed with avoid mixing oil with politics then it will almost certainly stay that way.

For Shell, the asset swap with Gazprom needs to be viewed as a down payment for the other, bigger deals it hopes to do with the Russians. If, for instance, Mr van der Veer can persuade Gazprom to pick Shell rather than a rival Western oil major as its partner in the huge Shtokman field in the Barents Sea, then the sacrifice of a 25 per cent slice of Sakhalin will have been worth it. The icing on the cake would be the fillip it gave to Shell's much-depleted reserves.

Aberdeen Asset's amazing comeback

Even as little as a year ago, few would have thought Aberdeen Asset Management remotely capable of finding the money to buy Deutsche Bank's UK asset management business, let alone persuading the City to back a £215m rights issue. Then still in the thick of the split-caps investment trust scandal, the company was widely thought of as dog meat. That the chief executive, Martin Gilbert, would survive this scandal to push through such an acquisition would have been thought less likely still. Yet here he is, with the City yesterday marking his achievement with a 13 per cent rise in the share price. As comebacks go, they don't come much swifter than this.

j.warner@independent.co.uk