By Oliver Belfitt-Nash of business new europe

Nambaryn Enkhbayar, former president of Mongolia and current opposition leader, has been arrested on corruption charges. Uniformed and plainclothes police seized him in a dawn raid on a house to which he had fled after refusing to answer questions about corruption, the government said.

Given that the arrest occurred just hours after Enkhbayar (pictured left) released a transcript of a security council meeting concerning the supposed illegitimacy of the 2008 elections that led to deadly riots, and only weeks before Mongolians go to polls in June for general elections, analysts suspect darker motives.

After occupying the presidency for the four years to 2009, Enkhbayar is now head of the new MPRP party – a splinter party that took the name of the old Communist Party after the original changed its name to MPP (Mongolian People’s Party). Enkhbayar is aiming to use his still considerable influence to win back votes in June.

Reports are swirling that protests by Enkhbayar supporters are being organised and bne has seen crowds gathering in Sukhbaatar Square, while workers in the centre of Ulan Bator were sent home early on Friday. Enkhbayar’s support is still fierce, despite being haunted by charges of corruption since he left office.

Enkhbayar was arrested for questioning in a serious corruption case, E Ambarbat, head of the Independent Agency Against Corruption, told a press conference. Though Ambarbat did not elaborate, the agency said the corruption involved the illegal privatisation of a government-owned hotel. “We have been investigating the corruption case involving Enkhbayar for a year. However, he never showed up for questioning. We had asked him often to come for questioning,” Ambarbat said.

However, the arrest occurred shortly after a press conference organized by Enkhbayar at which he released a classified document from the National Security Council. The leaked transcript sheds a new light on past elections and the protests that followed on July 1 2008, which resulted in the deaths of five people.

Enkhbayar told reporters: “The 2008 parliamentary election was corrupt. The people have the right to know who is responsible. People lost their lives. I want to tell the truth about the incident. The discussion of the meeting of the National Security Council is classified information. This should be changed. Parliament and the National Security Council can change this. Because it is classified, the public is unable to receive correct information. I have met with the administrations of the party two times to discuss this. I would like to turn over 300 pages of material.”

Investors are already starting to fret about what this means for a country that has been the darling of the emerging market investment community due to its double-digit economic growth fueled by the exploitation of its vast, untapped mineral resources. On the one hand, one analyst at the Eurasia Capital, a Mongolia-based investment group, told bne, rising political tensions would undoubtedly hurt stock market valuations. But at the same time, the arrest could be taken as sending out a strong message on anti-corruption enforcement. The analyst said: “In case of the conviction of Enkhbayar on corruption charges, it will indicate even stronger anti-corruption regulatory enforcement and rule of law, which would be positive influence for Mongolia and investors”.

[In an earlier version of this story, the comments from Eurasia Capital were wrongly attributed to Eurasia Group, the US-based research company. Sorry.]

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