First let's talk about your objective. If your primary objective is to keep out the water and critters, then why don't you just use some silicone over it on the inside? That will make it watertight and anything watertight is also "bugtight" (not a word I know lol).
However, as the other answerers stated, the better solution will be to entirely excavate the site. The problem with this may be:
- you may not know how to do this
- it may be more work then you are prepared for
- you are worried about other unknown variables like screwing up something in the wall during excavation.
- it looks like it may be built into the concrete wall (or whatever the wall is made of), so in order to remove you'd have to tear apart the wall and you're not prepared to do so
So, given the above, I could see why you might be reluctant to excavate it entirely. If you are unwilling to excavate it, then, as long as your concern is to keep the water and critters out of the INSIDE since sealing up the inside will not affect the wall), my suggestion is just to head to the hardware store and get a bunch of silicone.
If you cannot excavate, here is a quick fix from start to finish:
It looks like the outside opening drops down into the where there
is currently plywood at the top on the inside view. If this is the
case, then I would suggest removing the plywood (which can rot and
mildew) and replacing the plywood with something more permanent -
ideally hard plastic, because metal rusts. Try getting a thick sheet
(ideally 1/2" to 1" thick - or more if possible) of that clear
plastic, which is relatively inexpensive, from the hardware store or
nearby plastic shop.
If desired, spraypaint the plastic (black spraypaint is ideal) so
it cannot be looked through. Alternatively, you could use it as a sort of window to let in natural light, and remove the door on the outside. You could put a curtain on the inside so you could close it for privacy but open the curtain when you want some extra natural light.
Cut the plastic to size, and install where the wood was located.
Seal up all the edges both at the top (from outside the
building), and from the bottom (from inside the building), using
waterproof silicone. Be VERY liberal with the silicone.
Consider grinding down the metal on the inside to remove the
rust, and using it as a nice shelf. (OPTIONAL)
This should do the trick. Let me know if it works.