1MDB’s Dubious Middle Eastern Connections

By admin-s On Dec 17, 2014

Former UK Prime Minister Tony Blair lends an equally dubious hand

John Berthelsen, Asia Sentinel

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.