A billionaire businessman friend of Tony Blair and Peter Mandelson is the subject of a criminal inquiry into alleged bribery and corruption involving a Middle Eastern royal family.

Victor Dahdaleh, a Jordanian-born tycoon who lives in London, is being targeted in an inquiry by the US Department of Justice into alleged fraud against a company owned by the Bahraini royal family.

A spokesman for Dahdaleh, who is in his sixties, said the tycoon was “saddened” by the allegations and would be “vigorously contesting” them.

The claims have emerged from a commercial dispute, nicknamed “the aluminium wars”, between the American company Alcoa, one of the world’s largest metals firms, and Aluminium Bahrain (Alba).

The Bahraini royal family, which controls Alba, claims Dahdaleh acted as agent for Alcoa in transactions which it describes as “bribes” to Bahraini officials – a claim Dahdaleh denies.

The businessman has close links with Mandelson, the European Union trade commissioner, and has made a donation to Policy Network, an international think tank of which Mandelson is honorary chairman.

Dahdaleh has Canadian nationality and is president of the Canada-UK Chamber of Commerce in London, where he has hosted lunches with Mandelson, Blair, Alan Johnson, the health secretary, and Tessa Jowell, the Olympics minister.

In one speech to the chamber in 2006, Mandelson referred to Dahdaleh as “Victor, my friend”, describing him as a “business dynamo, a public spirited figure and a big-hearted personality – all rolled into one”.

Last week a friend of Dahdaleh confirmed his closeness to Mandelson and Blair, saying: “He can pick up the phone and talk to them if he wants to.”

The tycoon, who owns two houses and a £3.75m flat in Belgravia, central London, has made a £15,000 donation to the Institute for Public Policy Research, a think tank aligned with new Labour.

His foundation has also given more than £1m to the London School of Economics, a home of Blairite “third way” politics, and he serves as a governor of the LSE alongside Cherie Blair.

In a civil court case filed in America in February, Alcoa is alleged to have facilitated bribes to Bahraini officials. Court papers claim that Alba was overcharged to cover the cost of bribes. The documents allege that Dahdaleh’s companies received “money improperly siphoned from Alba while knowing that a portion of such money would be given to a senior government official”.

A spokesman for Blair did not respond to questions. Mandelson’s spokesman confirmed the commissioner knew Dahdaleh but denied he was a close friend.

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