Labour has called for the removal of Ben Elliot as Tory chair over a row about him being allegedly lobbied by Bahraini and Saudi diplomats in relation to a Conservative Middle Eastern group set up by one of his clients.

Anneliese Dodds, the Labour party chair, accused Elliot of having been allowed to “blur the lines between private business activities and his public responsibility” in the latest twist of the saga around two competing Tory Middle East groups.

Elliot has been criticised by those involved with the longstanding Conservative Middle Eastern Council (CMEC) over the party’s attempts to set up a new group called Conservative Friends of Middle East and north Africa (Comena), spearheaded by one of his clients, Mohamed Amersi.

Charlotte Leslie, the former Tory MP who runs CMEC, has accused Elliot of failing to disclose that Amersi was a client of his concierge company, Quintessentially. In particular, she has criticised Elliot for not revealing the business link when the Bahraini and Saudi ambassadors raised questions with the Tory party about the new Comena group.

However, Amersi told the Guardian that there were wider questions about why the Bahraini and Saudi ambassadors were said to have been lobbying Elliot in relation to Tory party matters. He said Elliot had not been acting on his behalf, and that Comena did not end up being affiliated to the party, with the group still awaiting a decision on its future.

“To me, the only time Elliot has a conflict is when he sits on the party board that is deciding the affiliation. That is the place where he has to disclose I am a Quintessentially client and recuse himself,” he said.

“Insofar as his discussions go with sheikh Fawaz, the Bahraini ambassador, I have not seen the letter, so I cannot comment on the substance. I would say if sheikh Fawaz was simply seeking clarification on the status of affiliation of CMEC or Comena, that is a legitimate question. But if he is seeking to influence the process by which Comena can or cannot be affiliated, or how Comena is composed, then I believe that is undue influence by a foreign state.”

The FT revealed this week that sheikh Fawaz Al Khalifa, Bahrain’s ambassador to the UK, wrote to Elliot stating that he and some fellow Arab diplomats were concerned by plans for the Conservatives to consider affiliation for Comena, after CMEC decided to disaffiliate from the party.

The Tories’ existing liaison group, CMEC, had for 40 years “occupied a special place in politics between the Middle East and United Kingdom”, sheikh Fawaz wrote.

According to the FT, sheikh Fawaz signed off his letter to Elliot: “I hope these concerns will be addressed for the sake of diplomatic confidence in the party and its affiliated groups, which are stronger and more important than ever.”

Amersi and Leslie are engaged in a dispute after she wrote to the Conservative party raising questions about his links with Russia. Amersi, who along with his partner has given the Conservatives GBP750,000, has said he had conducted legitimate business deals approved by US and Russian regulators from 1997 to 2005. The businessman says he is a dealmaker primarily in the international telecoms sector, who answered the Tories’ call for a new Middle East group to be affiliated to the party.

Amersi said he has now launched legal proceedings against Leslie and CMEC under data protection laws in an attempt to force her to disclose documents related to the dispute.

A Conservative party spokesperson said: “Ben Elliot’s work as Conservative party co-chairman is entirely separate from his other interests.

“Any discussions Ben Elliot has had about the Comena group would have been in his role as party co-chairman. The Conservative party has no involvement in foreign policy – that is a matter for the government.”

She added: “We completely reject the ludicrous suggestion put to us by the FT that a discussion about the niche issue of a Conservative Friends Of group amounts to an ‘intervention in the UK’s foreign relations.’

“Mr Amersi’s membership of Quintessentially is utterly irrelevant to any decision the party would take on affiliating a Friends Of group.”