The action by Moscow City Court is part of a sweeping crackdown on Navalny, the Kremlin's fiercest critic, and his Foundation for Fighting Corruption, or FBK.
A lawyer for the organization, Yevgeny Smirnov, accused prosecutors of pushing the case strictly to bar the group's candidates for running in the Sept. 13 parliamentary elections.
"This case has been linked to the law that bans all those who are connected with the Foundation for Fighting Corruption from getting elected," Smirnov told the court.
The court case was heard behind closed doors, with no media access, because authorities said it included classified information.
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The U.S. condemned the court’s decision, with the State Department saying Russia has “effectively criminalized one of the country’s few remaining independent political movements.” Spokesperson Ned Price again called for Navalny’s immediate and unconditional release.
Navalny, 44, was jailed in February for 2½ years on charges that he has said were politically motivated. He was arrested upon his return to Moscow in January after he was treated in Germany for poisoning with the nerve agent Novichok, which he has blamed on the Kremlin. The government has denied any involvement.
Navalny has complained about pain in his back and a leg while in custody, saying he is not getting adequate medical help — which Russian authorities also deny.
In March, he went on a hunger strike in protest, but he ended it more than three weeks later after his health deteriorated significantly. Tens of thousands of people gathered across Russia to protest Navalny's treatment in custody in April.
Russia's parliamentary elections are in September, and while neither Navalny nor his allies have been allowed to run for any political office, his "smart voting" strategy, supporting politicians outside the pro-Kremlin United Russia party, has proven effective at beating some ruling party candidates.
Labeling Navalny's regional campaign groups, which have been instrumental in the "smart voting" strategy, as "extremist" would thwart such activity in the future.
The Russian Justice Ministry designated FBK as a "foreign agent" in 2019, requiring it to submit regular reports about the sources of its funding and its objectives.
As it had been widely expected that FBK would be labeled "extremist," Leonid Volkov, chief of staff of Navalny's team, announced in April that Navalny's regional campaign offices would be closed. Their activities had become "impossible," he said, because staff members were endangered after the network of offices became "a personal enemy to Vladimir Putin."
Volkov said the campaign offices would not be rebranded to evade the "extremism" ruling.