Russia's oldest rights group fights 'foreign agent' tag MOSCOW (Reuters) - Russia's oldest rights group began a legal battle on Friday to avoid being branded a "foreign agent" under a new law it sees as a tool of repression by President Vladimir Putin. Memorial, which has fought to preserve the memory of Josef Stalin's victims for a quarter of a century, has faced problems ever since Mikhail Gorbachev gave it his blessing in the Soviet Union's dying days. Its employees have faced harassment and bureaucratic obstacles at almost every turn. But Memorial and groups like vote-monitor Golos, which has revealed electoral fraud, say they have never faced a bigger threat to their existence than in Putin's year-old third term. His return to the Kremlin has marked the start of a clampdown on civil liberties and democracy, a crude attempt to tighten his hold on power after the biggest protests of his 13-year rule, they say. Several opposition leaders face prosecution on what they call trumped-up charges, the pliant parliament has passed laws that turn up the heat on opponents and the threat of a battering by police has hung over protesters since a rally turned violent. There has never been such an assault on civil liberties in the last 20 years. This is an attempt to return to the Soviet era," Memorial's head, Alexander Cherkasov, said before his group challenged the new law in a Moscow court on Friday. We are not going to register as a foreign agent because it would be a lie ... An agent is someone like James Bond who comes down with a parachute and blows up railways. Like other groups affected by the new law, Memorial believes the term "foreign agent" has echoes of the Cold War and overtones of treason which would discredit it. It has already had graffiti saying "Foreign agent (heart) USA" daubed across one of the walls of its Moscow headquarters. As the first non-governmental organization registered in the Soviet Union, Memorial is an emblem of the fight for democracy and human rights in Russia. Its treatment is symbolic of Putin's policy towards opponents and independent voices. Memorial is now one of more than 1,000 NGOs under scrutiny for receiving funding from abroad and involvement in what is loosely defined as "political activities." Such groups will have to report on their work twice a year and state prosecutors have searched Memorial's offices, as well as those of hundreds of other groups. Memorial is challenging the state's right to apply the law against it and to search its premises. But it can be fined for not registering and any loss of funding could threaten its work. We're not sitting and waiting. We're staging a counter-attack," Cherkasov, said, describing the law as "madness." In some ways it was easier in the early days. Partly as a sign of respect for Memorial, former Soviet President Gorbachev provided funding for the coffin of former dissident Andrei Sakharov, one of the group's early figures. Cherkasov hails one of Memorial's finest achievements as its help in resolving a hostage crisis in 1995, during President Boris Yeltsin's rule, when Chechen rebels seized a hospital. But Memorial and other groups say little really changed with the Soviet Union's collapse in 1991 and the situation has actually deteriorated since Putin rose to power in 2000. A former KGB spy with an ambivalent attitude to Stalin, Putin says the searches of NGOs' offices are "routine" and the law will prevent groups from spying for foreign capitals. Irina Yarovaya, a pro-Putin deputy and an author of the law, said it was needed in the interests of openness. "The bill does not ban foreign financing, it only calls for honesty," she told parliament. As one says one's name when introducing oneself to others, NGOs should in the same way be saying who they are when they introduce themselves. Inspired by Sakharov and others' wish to create a monument to remember victims of Stalin's repression, Memorial started work in 1987. Its initial goal was to document the Communist past, but it quickly developed into a rights watchdog. Cherkasov put the group's budget last year at about 100 million roubles ($3.18 million). Much of the funding came from abroad, including from Sweden, Norway, the Netherlands and the European Union's executive European Commission. Until last year it also received funding from the United States, which was forced last year to close its aid mission in Moscow, the U.S. Agency for International Development (USAID). Cherkasov said it would be hard for Memorial to keep operating without foreign money - a concern voiced by other groups. "A totally new period has begun in Russia: The suppression of all independent organizations by the Kremlin," said Lev Gudkov, head of the Levada Center pollster, which has charted Putin's falling ratings. Gudkov accused Putin's allies of trying to suffocate independent research groups and civil society. He said state prosecutors had threatened to take his group to court over its refusal to register as a foreign agent, adding: "The Sword of Damocles will always hang over us." $1 = 31.4050 Russian roubles Additional reporting by Steve Gutterman; Editing by Elizabeth Piper and Sonya Hepinstall