In 2009, Jho Low Taek, the then 27-year-old investment wunderkind who persuaded Prime Minister Najib Tun Razak to establish the now-struggling 1Malaysia Development Bhd, also persuaded the fund to loan US$1 billion to help finance an oil exploration firm called PetroSaudi International Ltd, which was to put up US$1.5 billion with the stated aim of searching for oil in the Caspian Sea area.

PetroSaudi has since taken on the elements of tar baby, sticking to anything it touches, including former UK Prime Minister Tony Blair, who made a fortune by peddling his unsavory global connections to the firm.

Prime Minister Najib Tun Razak, in a series of press releases and public statements, has implied that the investment linked up Saudi Arabia and Malaysia, given the presence of Prince Turki bin Abdullah Abdulziz, the son of the King of Saudi Arabia, in the deal, although the oil company’s website doesn’t list him among its principals. But at that point, despite having been founded in 2000, PetroSaudi was little more than a gleam in the eye of its managing partner, Tarek Essam Ahmad Obaid, a London playboy said to be a grandson of the Saudi Sheikh Obaid, one of the kingdom’s most senior grandees and a chum of Jho Low.

“The Malaysian press took massive license by implying that the joint venture was an official partnership between states,” a source familiar with the deal told Asia Sentinel. “But in fact it was merely a private deal. They took even more massive license with claims about Middle Eastern investment in Malaysia -- we are actually talking about Malaysian investment in a private Middle Eastern company. Far from helping poor Malaysians develop 1MDB ended up lavishing money on one of the fattest rich Arabs going.”

In 2010, 1MDB sold its 40 percent interest back to PetroSaudi, but it didn’t get paid back. Instead, PetroSaudi created a 11-year bond at 8.67 percent interest to pay back the money.

Today 1MDB, struggling with unfunded liabilities, has had to seek an extension from three to six months of its unpaid debts from Bank Negara, the country’s central bank, under fears that Malaysia’s major banks might have to make provisions that had the potential damage the country’s financial system. They are hoping for the return of at least some of the US$500 million from PetroSaudi. In addition, 1MDB in March 2011 loaned PetroSaudi another US$500 million.

One person who apparently is not worried is Tony Blair, the former UK Prime Minister, who in 2010 signed a US$65,000 a month contract with PetroSaudi to act as a rainmaker, seeking to secure deals across the world for the company’s exploration and production activities. The details of Blair’s 21-page contract with PetroSaudi were published by the Sunday Times of London on Nov. 9, although few connected PetroSaudi to the 1MDB investment fund,, although Clare Rewcastle Brown, a former BBC reporter who edits the Sarawak Report, made the connection and reported on it last month.

According to the story, the contract, between Tony Blair Associates and PetroSaudi was negotiated in 2010, and included a clause providing Blair with 2 percent of any deal concluded. Apparently, according to the Sunday Times, the arrangement was ended after a few months. But, the story said, it provides what it called a detailed look at the former premier’s “cash-for-contacts” business, built on his years as prime minister and subsequent career as an aspiring peacemaker in the Middle East,

The Sunday Times said the contract involved the former premier arranging introductions to his contacts in China, including senior political figures. How much rainmaking got done is undisclosed. The firm was told it could not divulge Blair’s role to anyone without permission. However, the PetroSaudi contract made public by The Times indicated that Blair’s firm would help find potential sources of new investment and added that Blair would provide “introductions to the senior political leadership, industrial policymakers, corporate entities and other persons in China identified and deemed by us and you to be relevant to PetroSaudi’s international strategy.”

Blair has come under widespread criticism over his ethics in using his contacts in office to enrich himself in his new career. He left office almost a pariah for his role in supporting George W Bush in the 2003 invasion of Iraq when British intelligence services knew the Saddam Hussain government had no weapons of mass destruction. He befriended a series of thuggish international leaders including Bashar al-Assad, Syria’s besieged dictator, and maintained friendly relations with the since-deposed and murdered Muammar Ghaddafi of Libya.

In the meantime, 1MDB continues to struggle. What was the US$1 billion in loans and bonds to PetroSaudi is said to be parked in the Cayman Islands, according to opposition figures Tony Pua of the Democratic Action Party and Rafizi Ramzi of Parti Keadilan Rakyat But whether 1MDB can meet even the extended loan payment period depends on whether the money can be repatriated from the Caymans. The fund has officially postponed the sale of up to RM8.4 billion in sukuk bonds to next year.

While the postponement was said to be because the company is asking for a two-month extension to the completion of a US$3.2 billion powerplant it is joint venturing with Mitsui & Co, the opposition’s Rafizi and Pua say it’s because 1MDB can’t get its prospectus in shape to sell the bonds – that its cash flow isn’t sufficient to cover the debt, and that the repayment of the money from PetroSaudi is overdue.

Despite its apparent failure to find oil in the Caspian, from its shaky beginnings, PetroSaudi has gone on to win a variety of projects including a well off Venezuela as well as projects in Ghana, Indonesia, Saudi Arabia and Tunisia although the website gives scant information on the activities in the latter countries. It does list two drillships purchased from Singapore interests.