French President Nicholas Sarkozy's bid to be re-elected to office for a second term has been dealt a severe blow by an ever-widening arms deal scandal. Three of Sarkozy's close aides are already under investigation for their parts in a sordid story of kickbacks, failed presidential campaigns and fatal bomb blasts in Pakistan. The French sure do turn up in arms deal sagas rather frequently eh?

Known in France as L'affaire Karachi, or less lyrically in English, "The Karachi affair", it has enraptured French media in recent weeks. It is, after all, the most explosive corruption investigation in recent French history and poses a significant threat against the President himself. The scandal dates all the way back to 1995 when France sold Pakistan three submarines. It is alleged that the commissions "earned" by the French officials who secured the deal, theoretically helped fund the presidential campaign of former Prime Minister Edouard Balladur. Sarkozy was the finance minister at the time and a spokesman for Balladur. French prosecutors are also investigating an additional case which alleges that the failure of French officials to pay "kickbacks" to their Pakistani counterparts who had helped to secure the deal, resulted in a bomb attack on a bus in Karachi in 2002 in which 15 people, including 11 French submarine engineers, died.

Last Thursday, France was rocked by the arrest of one of Sarkozy's closest friends. Nicolas Bazire, was best man at Sarkozy's wedding to Carla Bruni in 2008 but crucially, in 1995, he was also Balladur's campaign chief. Bazire is being investigated for "complicity in the misuse of public money". Another Sarkozy aide, Thierry Gaubert, was also arrested and held overnight for questioning and then released. Gaubert was Sarkozy's financial adviser during the President's tenure as budget minister. Last weekend, the estranged wife of Thierry Gaubert revealed to French media that she had told investigators that her husband had made trips to Switzerland and collected suitcases stuffed full of cash, which were then handed to Bazire. Sarkozy is thought to have been responsible for redirecting the kickbacks that were meant to be paid to the Pakistani officials back to Balladur's campaign coffers through Gaubert and Bazire. Sarkozy's office is however in defensive mode, and has been swift to distance the French President from the arrest of his aides. On Thursday, Sarkozy's office issued a statement that claimed he had "not the slightest responsibility" for the financing of 1995 presidential campaign of Edouard Balladur.

Balladur was of course defeated by former French President Jacques Chirac, who, upon assuming office, is said to have cancelled payments to middlemen on the contract, thus earning the wrath of the Pakistani intelligence officers who stood to profit from the deal. The 2002 bomb attack in Karachi is alleged to have been an act of vengeance against the French for failing to pay the promised paybacks. Sarkozy has dismissed the theory of revenge attacks argued by relatives of the French people who died, claiming instead that the blasts were the handiwork of al-Qaeda.