The Russian government gave the US until October 1 to close the mission, accusing it of meddling in politics, Russian news agencies reported.
The Russian Central Bank has meanwhile announced on its website that any financial assistance received by Russian NGOs will be investigated as potential money laundering or financing that might be mean to fund terrorists, the daily Kommersant reported.
Banks that receive funding transfers for Russian NGOs from abroad will henceforth be requited to report the transfers to the Russian Federal Financial Monitoring service.
USAID has worked in Russia for two decades, spending nearly $3 billion on aid, health and democracy promotion programs.
The termination of the US AID’s work in Russia – and the some $50 million it planned to spend in Russian this year – is bound to seriously harm the operations of a string of NGOs that are heavily dependent on its funding, including election monitor Golos, which showed up irregularities in recent elections.
Particularly, the exposure of the electoral fraud in last year's parliamentary elections by Golos helped spark huge anti-Kremlin street demonstrations.
“This is a first strike in crushing Russian civil society as we know it,” said Bellona President Frederic Hauge. “Any funding for NGOs within Russia is very scare, especially if those NGOs are in opposition to the Kremlin line.”
Russian authorities are also discussing blocking access to YouTube.com, on the pretext of the recent spate violence stirred up in the Middle East and culminating in the death of Christopher Stevens, the US Ambassador to Libya.
The attacks by radicals have been blamed on the viral broadcasts of the film “The Innocence of Muslims,” which many in the Islamic world have said is an affront to their religion for the film’s depiction of an image of the prophet Mohammad.
Evidently, Russian authorities - who are seeking further internet crackdowns - fear the oranizational powers of social networking sites as well as unofficial footage that could cast its policies in a bad light, such as the many videos that emerged on YouTube of police beating anti-kremlin marchers, or protestors for Pussy Riot, the band recently jailed for two years for their anti-Putin protest in a Moscow cathedral.
The expulsion of USAID follows a government crackdown on pro-democracy groups that seems emboldened by the Duma’s passage in July of amendments to Russia’s NGO law, requiring civil society groups who receive foreign funding to register themselves as “foreign agents’’ with Russia’s Ministry of Justice, or face fines, jail time and closure.
Agencies receiving foreign funding are also to undergo biannual audits under the new amendments that take effect November 1.
Critics of the new NGO law focus on its vague wording and virtually non-existent definition of “political activity” – which singles groups out for special scrutiny. They also say that their required self branding as foreign agents – a moniker that will have to appear on all of their publications and websites – harkens back to Stalinist purges.
They further say that by being forced to call themselves what amounts to spies will impede foreign financing that is largely apolitical.
Russia’s Ministry of Foreign Affairs said in a statement that the decision to expel USAID “was taken mainly because the work of the agency's officials far from always responded to the stated goals of development and humanitarian cooperation. We are talking about attempts to influence political processes through its grants."
Russian authorities have become increasingly suspicious of non-governmental organizations (NGOs), which they believe are using foreign funding to foment political unrest,
Earlier this year, President Vladimir Putin alleged that protests surrounding his re-election were orchestrated by US-funded NGOs via cash transfers from the US State Department.
In announcing the closure of the USAID office, US state department spokesperson Victoria Nuland told a briefing that, "We remain committed to supporting democracy, human rights, and the development of a more robust civil society in Russia and look forward to continuing our cooperation with Russian non-governmental organizations."
She would not respond to questions on what she thought the reasons behind the Kremlin's decision were, but said there was a sense "that they don't need this any more."
The United States began its operations in Russia after the end of the Soviet Union, spending around $2.7bn on a wide range of human rights, civil society, health and environmental programs.
Russian human rights activists lamented the decision to expel USAID.
The head of Golos, Liliya Shibanova, told the BBC that USAID’s expulsion is "a bad signal," saying there were very few other sources of funding for election monitoring groups, and that she expected to see other NGOs leaving Russia.
The head of Moscow Helsinki Group, Lyudmila Alekseyeva, said in remarks to Russian news agencies that it was the Russian population, rather than the US, which would suffer from the loss of "useful services... free legal consultations, educational programs and others."
It is unclear whether some if any US funding of the organizations can continue, but a White House official told AFP that the administration of US President Barack Obama was committed to promoting civil society in Russia.
"Over the coming weeks and months the Obama administration will be looking at ways to advance our old foreign policy objectives using new means," said the official.
The Kommersant daily compared the departure of USAID to the 2007 clampdown on the activities of the British Council, which poisoned relations between Moscow and London. The US Peace Corps had also been asked to leave Russia in 2002.
"The departure of USAID is the biggest conflict between Moscow and the West in the last five years in questions of democracy and human rights in Russia," the paper said.