The Moscow-based judges annulled the lower court's verdicts against Navalny and his co-defendant, businessman Pyotr Ofitserov, on Wednesday.

Both men were convicted in 2013 of embezzling funds in a deal with a state timber company in the central Russian city of Kirov. At the time, the blogger and anti-corruption whistleblower Navalny received a five-year jail sentence with his co-defendant receiving four years. In a controversial move, the two were arrested but released the next day and their sentences have since been suspended.

The trial was widely perceived as an attempt to rein in Navalny, who placed second as an opposition candidate for mayor of Moscow in 2013. He was not eligible to run for office again due to the conviction.

Navalny successfully appealed the verdict before the European Court of Human Rights. The international court ruled in February that the two defendants were deprived of a fair trial and convicted over "acts indistinguishable from regular commercial activities."

'They should have annulled'

On Wednesday, the 40-year-old politician said the Russian Supreme Court did not act in accordance with the international verdict.

"Formally, they should have annulled the [entire] case, but they have sent it back to be looked at again," he said.

The lengthy process is now set to restart in Kirov, forcing the Muscovite to divide his time between the two cities.

"I have absolutely no desire to start traveling to Kirov again," he told Russian news agencies. "The ruling is aimed to hamper my political activities."

Navalny also said his defense team is considering another appeal directed at the Committee of Ministers of the Council of Europe.

Brother as 'hostage'

The former mayoral candidate also received a suspended sentence in late 2014 for a case  linking him to an embezzlement of funds  belonging to an affiliate of French cosmetics company Yves Rocher. In the same case, Navalny's brother Oleg was sentenced to three and a half years in prison. The politician described his brother's conviction as the Kremlin taking a "hostage" to control him.

With the Kirov process back at square one, Navalny is eligible to run for office again, his lawyers and staff told reporters. Russia is set to hold a presidential election in 2018, with opposition struggling to find a strong candidate to counteract the likely bid of the current President Vladimir Putin.

dj/sms (AFP, AP, Interfax)