Terrence Edwards in Ulaanbaatar -

A December vow to return to politics made from a hospital bed in South Korea by one of Mongolia's most popular yet controversial politicians threatens to rock the country's fragile coalition government and complicate tricky negotiations with foreign investors.

The reappearance on the scene of the jailed former president and prime minister Nambar Enkhbayar after a presidential pardon cut short his two-and-a-half-year prison sentence for corruption is certain to have a dramatic effect on Mongolian politics and the delicate relationships that exist within the coalition government. After recuperating in South Korea from a hunger strike he took in protest at his jailing, Enkhbayar hopes to lead once again his four-year-old Mongolian' People's Revolutionary Party (MPRP), which won enough votes in the 2012 parliamentary elections to participate in the coalition by running a populist campaign heavily critical of the massive Oyu Tolgoi copper-gold mine and of the company running it, the global mining giant Rio Tinto.

"It was quite evident [Enkhbayar] would come back, it's too early for him to retire," says Luvsandendev Sumati, head of the Sant Maral Foundation polling agency. "2014 is actually quite an important time to start an election campaign."

The player

Enkhbayar has been a central figure in Mongolian politics throughout the country's over 20-year history as a democracy. He held both the office of the presidency and PM for the now-opposition Mongolian People's Party, all the while amassing great wealth. His accomplishments include the repayment of debt to Russia that Mongolia had wracked up as a Soviet satellite state, as well as serving as president during nearly all of the negotiations for the Oyu Tolgoi investment agreement with Ivanhoe Mines, now called Turquoise Hill Resources and majority owned by Rio Tinto. Many believe that the two are not unrelated. "It's common understanding that the money he used to pay off old Soviet debt was with Ivanhoe money," says Badral Munkhdul, head of the market intelligence firm Cover Mongolia.

It is his alleged involvement in these kinds of deals that earned him the nickname "the godfather of corruption". That reputation finally caught up with Enkhbayar when he was arrested and stood trial in the summer of 2012 on four counts of corruption, including the illegal privatisation of a newspaper and the prime-located Urgoo hotel. His sister Enkhtuya is suspected of acting as an accomplice and is still wanted by Interpol. Based in Singapore before she disappeared after her brother's arrest, Enkhtuya's alleged crimes include money laundering and the sale of the Mongolian flag to illicit sea vessels.

Rather than ruin him, Enkhbayar's arrest actually resulted in a surge in popularity, according to data from the polling agency the Sant Maral Foundation. Data collected just before and after his arrest shows Enkhbayar's popularity quickly climbed from the second-most popular politician to the first.

Although President Tsakhia Elbegdorj's administration insisted the arrest was legitimate, it did serve to effectively prevent Enkhbayar from running a campaign for parliament that summer. Enkhbayar spent much of his year of incarceration in a Mongolian hospital due to his ailing health while his party and supporters held numerous demonstrations outside Mongolia's Government Palace in Ulaanbaatar calling for his release. Supporters of Enkhbayar finally got their way a month after the 2013 presidential election, when Elbegdorj gave Enkhbayar a full pardon.

Behind the scenes

Even if his conviction bars him from holding office again, Enkhbayar could still exert significant influence behind the scenes. "No one will prevent him from running politics behind certain leaders," reckons Sant Maral's Sumati, adding that Enkhbayar's chief concern will likely be expanding the influence of his party, which he formed in 2010 following a feud within the Mongolian People's Party.

How Enkhbayar might choose to influence progress in talks over the Oyu Tolgoi project as well as the litany of other smaller projects under development is not clear, says Cover Mongolia's Munkhdul. Mongolia is still reeling from the last time the government intervened in the project, when last summer it stood in the way of a $4bn project-financing package. That money would go in part towards financing a $5bn underground mine that Rio Tinto says would unlock 80% of the mine's wealth. Rio responded by putting construction on hold until every outstanding issue between itself and the Mongolian government was settled. "At this moment in time I think he would be described as a populist politician, but... I would describe it as his current political strategy more than his own political views," says Munkhdul.

For many, Enkhbayar's return, as well as the reduced sentences for many other public officials arrested for corruption, demonstrates a lack of conviction in Mongolia's battle against corruption. President Elbegdorj made fighting corruption a major focus of his first term, partly in the interest of creating a legitimate business climate for investment. "I think the biggest achievement of his [Elbegdorj's] campaign against corruption was changing the public perception that tolerance for corruption has lessened," says Munkhdul.

What happens next could determine whether the message sent to investors is that Mongolia is open for business or is once again for sale.