The Russian government has voiced its deep displeasure over the "unprecedented and highly unwelcome" decision to block the building of its new embassy in Yarralumla.
The National Capital Authority has ordered it to clear the site within 20 days.
A spokesman for the Russian government said that it would seek legal advice after the NCA told it that its lease for the land to replace the existing embassy on Canberra Avenue was "terminated".
The Russian spokesman conceded that "the building project had indeed encountered multiple problems and delays through several years," but said that "at all times, these were a matter of constructive and frank consultations between the embassy and the NCA.
"It is really puzzling why the NCA chose to terminate the lease now that the construction process at Yarralumla site has been steadily going on uninterrupted for the last two plus years, with results already very much visible and prospects rather clear."
The ostensible reason for the NCA's blocking of the new compound was that it hadn't been completed within the three years allotted, but it may raise questions about whether any politics has intruded.
The Russian embassy asserts that progress on construction had been made but the NCA sees the work as insufficient.
The NCA said permission for the new embassy was first granted in 2008, with building approvals on March 31, 2011 and September 23, 2011.
"Under the lease, the Russian Federation had agreed to finish construction within three years. Despite some efforts to progress an embassy, completion of the project has not occurred," the NCA said.
At the site near Parliament House on Tuesday, there was a security guard's hut and building material but no obvious sign of actual digging or concreting.
The embassy concedes that the new building has been dogged with problems.
At one stage, the federal government said that Russian workers would not be allowed in to work on it.
It's not clear whether security concerns by the Russian government have had an impact.
The existing embassy on Canberra Avenue had a long and colourful history of espionage in the Cold War, with real-life plots which would have pleased John le Carre. It's opposite the Kingston Hotel which featured as a meeting place in some of the Cold War cat-and-mouse games.
It may be that Russian fears that too much oversight and access from outside might compromise security in the new compound.
In 2018, the project was estimated to cost $8.2 million. It included a large swimming pool. The existing Griffith compound would be kept as a residential precinct.
Authority chief executive Sally Barnes said the new embassy was to be on a "premium site in central Canberra, close to Lake Burley Griffin and the Australian Parliament House.
"On-going unfinished works detract from the overall aesthetic, importance and dignity of the area reserved for diplomatic missions and foreign representation in the National Capital".
She added: "With limited blocks currently available for diplomatic purposes, unless a country can demonstrate a willingness and ability to develop the site, the NCA supports a policy of 'use it or lose it'."
The authority said it had been negotiating with the Russian government over construction for many years but "in the absence of a commitment to a completion date, the NCA decided to terminate the lease. The Russian Federation has 20 days from the day the notice of termination was served to clear the site".
Once cleared, the authority will return the site back into the pool of land available for diplomatic purposes.
"The decision to terminate the lease for a new embassy does not affect the existing Russian Embassy. The Russian Federation may submit a new application in the future which the NCA will review and assess accordingly," it said.
Construction of the new embassy has been dogged by delay. Two years ago, the Russian ambassador to Australia assured the NCA that work would start later that year.
In 2018, the project was estimated to cost $8.2 million. It included a large swimming pool. The existing Griffith compound would be kept as a residential precinct.
