* Putin ally says Russia revising ties with U.S.
* Moscow outraged by human rights bill
* Further setback to "reset" in relations (Adds Foreign Ministry comment)
By Thomas Grove
MOSCOW, Jan 30 (Reuters) - Russia scrapped a law enforcement agreement with the United States on Wednesday, further turning back the clock on a "reset" in relations since President Vladimir Putin's return to the Kremlin last year.
An order to end the deal, signed by Prime Minister Dmitry Medvedev, was posted on the government's website. It said the agreement, under which Washington provided financial assistance for law enforcement and drugs control programmes, "does not address current realities and has exhausted its potential".
Alexei Pushkov, a Putin ally who heads the international affairs committee in the lower parliament house, said Russia was "reformatting its relationship" with the United States.
"This is already the third agreement cancelled in the last half-year. We are saying farewell to our dependence on 'Power No. 1'," he said on Twitter.
Putin's foreign policy rhetoric has frequently focused on external threats since he returned to the presidency in May.
Moscow ordered the U.S. Agency for International Development to cease operations in Russia in October, saying the United States was using the mission to interfere in politics.
It has also outlawed U.S.-funded "non-profit organisations that engage in political activity".
Moscow was infuriated by a U.S. law adopted in December that bars Russians accused of grave human rights abuses from entering the United States and freezes any assets they have there.
It responded with legislation imposing similar measures and banned the adoption of Russian children by American families, damaging what was left of the "reset" in ties initiated by U.S. President Barack Obama at the start of his first term.
Putin has also sought to shed Russia's image as a financial aid recipient. The Foreign Ministry said the agreement was reached at a time when Moscow was short of funds for law enforcement, but Russia could now provide for itself.
The U.S. Embassy in Moscow declined immediate comment.
REDUCING U.S. INFLUENCE
Russia announced in October that it was withdrawing from a decades-old agreement under which Washington helped it dismantle nuclear and chemical weapons. Russia argued it now had the power and finances to carry out disarmament itself.
Dmitry Trenin, director at the Carnegie Moscow Center think tank, said Putin was playing on Russians' patriotism by portraying Washington as a meddling foreign power in an attempt to cast dissenters as traitors working for an outside threat.
"Mr. Putin's goal is to reduce as much as he can U.S. influence on Russia internally," he said.
"I'm sure there will be a lot of damage but they believe the pay-off will be bigger: whoever opposes the leadership here will be seen as a fifth column who is doing the bidding of the United States, unpatriotic at minimum and very likely a traitor."
Several members of a protest movement against Putin, which started after allegations of vote rigging in a 2011 parliamentary election, have been portrayed by the media as being on the payroll of foreign countries.
Russia's Foreign Minister Sergei Lavrov described the U.S. human rights bill, named after lawyer Sergei Magnitsky who died in detention in 2009, as "odious", but said Moscow wants constructive ties with the United States.
Trenin said Moscow was unlikely to cut major initiatives. Russia allows the NATO-led International Security Assistance Force to use a rail route through its territory to transport equipment. (Additional reporting by Gabriela Baczynska; Editing by Rosalind Russell)