By Mehreen Zahra-Malik and Matthew Green
ISLAMABAD, Jan 15 (Reuters) - Pakistan's Supreme Court ordered the arrest of the prime minister on Tuesday in connection with an alleged corruption scandal, ratcheting up pressure on a government locked in a showdown with a cleric who has a history of ties to the army.
The combination of the arrest order and a mass street protest in the capital Islamabad led by Muslim cleric Muhammad Tahirul Qadri raised fears among politicians that the military was working with the judiciary to force out a civilian leader.
"There is no doubt that Qadri's march and the Supreme Court's verdict were masterminded by the military establishment of Pakistan," Fawad Chaudhry, an aide to Prime Minister Raja Pervez Ashraf, told Reuters.
"The military can intervene at this moment as the Supreme Court has opened a way for it."
Thousands of followers of Qadri camped near the federal parliament cheered as television channels broadcast news of the Supreme Court's order to arrest Ashraf on charges of corruption, who took over in June after judges disqualified his predecessor.
Pakistan's powerful army has a long history of coups and intervening in politics. These days it seems to have little appetite for a coup but many believe it still tries to exert behind-the-scenes influence on politics.
The ruling coalition led by the Pakistan Peoples' Party has weathered a series of crises with the judiciary and military over the last few years and hopes its parliamentary majority will help it survive until elections are called within a few months.
President Asif Ali Zardari hopes to lead the first civilian government that will complete its full term and hold elections. Any move to oust the prime minister would not automatically trigger the collapse of his coalition since lawmakers can simply elect another prime minister.
But power struggles distract the government from tackling an array of problems - a Taliban insurgency, economic stagnation and growing sectarian tensions triggered by bomb attacks and tit-for-tat shootings.
The Supreme Court gave authorities 24 hours to arrest Ashraf and 16 others in connection with an alleged corruption scandal involving power plants while he served as water and power minister.
Government officials said they were baffled by the arrest order, which came hours after Chief Justice Iftikhar Chaudhry said elections should go ahead as scheduled.
"This was totally unexpected," an official in Ashraf's office told Reuters. "The prime minister and two or three of his friends were watching Qadri speak on television and this suddenly happened."
Pakistan's stock exchange fell by more than 500 points, or nearly three percent, on news of the court order, due to fears over fresh political turmoil, which comes against a backdrop of militant bombings and tension on the border with India.
Qadri, who played a role in backing a military coup in 1999, threatened to remain camped out near the federal parliament with thousands of supporters until his demands for the resignation of the government were met.
The fiery orator returned home from Canada less than a month ago to lead a call for electoral reforms to bar corrupt politicians from office that has made him an instant hit among Pakistanis disillusioned with the state.
In a speech from behind a bullet-proof shield in front of parliament, Qadri praised the military and the judiciary, the country's two other power centres.
"(The government) has wasted and brought a bad end to our armed forces, those armed forces who are highly sincere, highly competent and highly capable and highly professional," he said, alternating between Urdu and English.
"Even they can't do anything because the political government isn't able to deliver anything from this land. Judgments are being passed by our great, independent judiciary but the government is not ready to implement them."
Qadri is demanding that the government dissolve the legislature and announce the formation of a caretaker government to oversee the run-up to elections.
He told Reuters on Friday that the military could play a possible role in the selection of the interim administration, a stance which has sharpened fears he may be working at the army's behest. The military denies any ties to him.
One senior military officer, who said he was speaking in a purely personal capacity, said there was no appetite in the military to repeat the coups seen in Pakistan's past, but added the stand-off could be resolved if the army played a role in the formation of a caretaker government as a "moderator".
"We should try as far as possible to abide by the constitution and law in looking for change. The army chief has made this clear," the officer told Reuters.
"But things seem to be moving beyond control," the officer added. "It is totally incorrect to say the army is behind Qadri. But if he brings thousands of people to the streets and things get worse, there may be very few options."
LIFE ON THE LINE
The government and opposition are poised to start negotiating the formation of a caretaker administration to oversee the run-up to the polls as soon as parliament is dissolved, which is due to happen in March. An election date has yet to be announced.
Qadri can mobilise thousands of members of his Minhaj-ul-Quran religious organisation, which runs a network of schools and clinics and organises relief for victims of natural disasters.
"He's spent huge money and he's putting his life on the line, he's here to redeem the people," said Mohammed Waqas Iqbal, a local government official who had travelled from a village in northern Punjab to attend the rally in Islamabad. (Additional reporting by Katherine Houreld and Mubasher Bukhari in ISLAMABAD and Jibran Ahmad in PESHAWAR; Writing by Michael Georgy; Editing by Raju Gopalakrishnan)