HE arrest of Bermuda-based Dutch oil tycoon John Deuss has exposed a trail of questionable influence leading to South Africa's second highest office.

The fortunes of Deputy President Phumzile Mlambo-Ngcuka's political adviser, Ayanda Nkuhlu, are intimately tied to those of Deuss, whose company has seconded him to Mlambo-Ngcuka's part-time service.

Nkuhlu is in the anomalous position of representing the interests of state oil company PetroSA in a joint venture with Deuss's Transworld group; of also heading a local subsidiary of Transworld; and of being seconded by this subsidiary to advise Mlambo-Ngcuka, to whom he has been close for years.

Nkuhlu has denied he acted in Deuss' interest when he advised Mlambo-Ngcuka, even though Deuss paid the bill.

Deuss has a colourful past, which includes busting the oil embargo for the apartheid regime. In 1985 the then-exiled ANC called him a "criminal . . . engaged in this nefarious trade".

He staged a South African comeback four years ago when PetroSA and Transworld formed a joint venture, PetroWorld, to pursue international opportunities in oil and gas.

PetroWorld has brought PetroSA little but trouble. Its projects have been disallowed or are on hold. And the Reserve Bank has fined PetroSA R12-million ($1.6 million) for entering the joint venture in violation of exchange control regulations.

Deuss' arrest last month in Bermuda, his adoptive home of three decades, may come as vindication for oil sector critics who have long questioned his embrace by PetroSA.

Bermudian police were acting on an international warrant issued by Dutch authorities.

He was released on $10-million bail before volunteering to accompany detectives to Holland.

The Dutch warrant stated that Deuss was wanted for questioning on allegations of money laundering, handling of stolen property and leading a criminal organisation. This flowed from Dutch and British investigations into "carousel fraud", which has caused European tax authorities to lose hundreds of billions of euros.

Carousel fraud involves bogus value-added tax refund claims on electronic goods round-tripped in and out of European Union countries. It mushroomed as perpetrators used Deuss' First Cura?ao International Bank (FCIB), based in the Dutch Caribbean territory of Cura?ao, to create virtual carousels.

In September Dutch and British authorities raided the bank in Cura?ao and Deuss-linked properties in Holland and the United Kingdom. Deuss was quoted then as saying that FCIB and its affiliates, including Transworld, "have at all times conducted their business in full compliance with all applicable laws, regulations and rules".

And following his arrest in Bermuda a Deuss lawyer stressed: "He is not charged with any criminal offence in The Netherlands, but is simply wanted for questioning."

Just how Deuss pulled off his South African comeback remains unclear. Sources privy to PetroSA's affairs have claimed that political pressure was brought to bear on PetroSA to go ahead with a deal that may not have been in its interests.

Nkuhlu last week said that Mlambo-Ngcuka, then Minister of Minerals and Energy, "did not pressure nor railroad PetroSA".

It is also not clear why PetroSA entered the joint venture without obtaining Reserve Bank approval. PetroSA's 2006 annual report reveals that the Reserve Bank fined the parastatal R12-million, half of it refundable, for the contravention. The report calls it "wasteful expenditure".

Despite the provisions of the Public Finance Management Act, there have been no legal consequences.

The terms of the agreement appear to have been prejudicial to PetroSA in that it tied the parastatal into exclusivity with Transworld on projects abroad.

This has not been respected in practice and PetroSA's present management is understood to have considered terminating the deal.

The connection with Mlambo-Ngcuka, responsible for PetroSA as minerals and energy minister at the time, was apparent from early on.

Nkuhlu had followed Mlambo-Ngcuka from trade and industry, where she was deputy minister, to minerals and energy, where he was her chief of staff. He was later redeployed to PetroWorld to represent the interests of PetroSA. In 2004 a company called PetroWorld RSA was registered locally, with Nkuhlu as CEO.

The original intent, according to Nkuhlu, was for PetroWorld RSA to be a local subsidiary of the Bermudian joint venture holding company, PetroWorld Limited, but the Reserve Bank disallowed this as it would have created a "loop structure".

Such arrangements are outlawed because they could defeat foreign exchange regulations.

As a result, PetroWorld RSA was created as a straight subsidiary of Deuss' Transworld. This put Nkuhlu in the ambiguous position of being in Deuss's employ, but also of representing PetroSA's interests vis-?-vis him.

It is PetroWorld RSA ? effectively Deuss ? that has seconded Nkuhlu to Mlambo-Ngcuka's office as a part-time adviser. Nhkulu is particularly trusted and influential in her office.

Nkuhlu has argued that there was nothing untoward about his overlapping roles in the deputy presidency, PetroSA and PetroWorld, saying: "It will not only be unfair but factually incorrect to say that John Deuss' 'questionable influence' has reached the Deputy President's Office. I do not represent PetroWorld RSA . . . when I act in my capacity as part-time adviser to the deputy president."