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Jailing of former Mongolia president rattles investors

Mongolia's former president Nambaryn Enkhbayar has been jailed for corruption, raising uncertainties for foreign investors, particularly in its booming mining sector. Stakeholders in Mongolia include German firms.

Enkhbayar had faced charges including the illegal privatizations of a hotel and a newspaper and the misuse of donated television equipment for his own station during the televised three-day hearing.

The 54-year-old said the charges were "groundless" and accused prosecutors of twisting the facts. His lawyer said Ankhbayar would appeal.

Investors in Mongolia's booming mining sector greeted the trial outcome with anxiety, claiming it could worsen the country's current political gridlock and delay key decisions over major mining projects.

Enkhbayer was barred from running in Mongolia's June parliamentary election. He was arrested in April by the country's anti-corruption authority. He was president from 2005 until 2009, when he lost to Tsakhia Elbegdorj.

A former president with clout

Oyu Tolgoi Mine

Germany is Mongolia's top EU trading partner

Enkhbayar had wielded considerable influence over politics, which has been dominated by debate over whether Mongolia's mining assets should be under local control.

Enkhbayar had supported moves to keep the country's Tavan Tolgoi coal mine, which has the potential to be one of the world's biggest coal suppliers, under local control.

Last year, Enkhbayar split from the long-ruling Mongolian People's Party (MPP) and formed the breakaway Mongolian People's Revolutionary Party (MPRP), becoming its chairman.

In June's parliamentary election his MPRP and an allied party won 11 of 76 seats and agreed to cooperate with Mongolia's Democratic Party (DP) which broke with the MPP last January.

The election results are still be contested over charges of vote-buying with the DP holding 31 seats and the ex-Soviet era MPP on 25.

Implications for German investors?

Germany has a sizeable stake in the Tavan Tolgoi mine. In August last year, the German firm BBM Operta announced that it, along with Australia's Macmahon Holdings Limited, had been given preferred contractor status for Tavan Tolgoi's mining operations.

Operta had anticipated production at the mine to reach production levels of three million tons per year and at the time referred to the deal as a “milestone in the economic relations between Germany and Mongolia.”

Germany's economic relations with Mongolia have been growing fast. The Central Asian country sits on significant natural resources including coal and rare earth metals, which are coveted by resource-hungry Germany.

According to Germany's Foreign Ministry, bilateral trade between the two sides reached 100 million euros in 2010 and Germany is Mongolia's biggest trade partner in the EU.

sej, ipj/ng (Reuters, AFP, AP)