Now, he is betting on North Korea.

James Passin, a hedge fund manager at New York-based Firebird Management, believes the nuclear-armed country sits on as much as 1 billion barrels of crude -- enough to make it as big a producer as Oklahoma. If the oil exists, he wants to help unlock it.

"You have a country with 25 million people -- young, highly disciplined, literate -- and a strong military-industrial complex," he said in an interview. "It's possible that the early investors will be rewarded with potential for massive appreciation."

The risks of sinking cash -- even just $US7 million ($10 million) or so of Firebird's $US700 million in assets -- into a neo-Stalinist state with labour camps and virtually no private property are obvious. The geopolitical volatility was on full display last week, as North Korea claimed that it had tested a hydrogen bomb. And Passin is treading on murky investment territory, given the United States' sanctions against the country.

His investors have experienced the wild rides that come with such frontier markets. Two of his funds are being liquidated after deep losses, including on banking in Iraq, gold in Armenia and oil and gas in Kenya.

But Passin isn't deterred. "I see opportunities when other people are afraid," he said.

Lessons from Thales

Passin, 44, studied philosophy at St. John's College in Maryland. He was inspired to enter finance, he said, in part by the story of Thales, a philosopher in ancient Greece who got rich by monopolising olive presses before a bumper harvest he had foreseen in the stars.

Contrarian instincts have led Passin to out-of-the-way markets like Chechnya, Congo and Somalia, where he surveyed an oil prospect with a warlord.

Joseph Naemi, one of Passin's longtime business partners, recalled joining him in a brash attempt in 2002 to buy Uzbekistan's national oil company, Uzbekneftegaz. They had a meeting with a dozen Uzbek government officials, and Passin's pitch was simple: He was there to write a cheque for $US600 million to $US700 million to buy the entire company. But the country did not go for the proposal.

"The sceptical look around the boardroom was actually hilarious," Naemi wrote in an email.

In 2006, Passin toured Mongolia and zeroed in on its stock exchange. It was "just a room with some computers," Passin recalled.

He said he snapped up shares in "anything that was listed." By 2011, the country's economy was clocking one of the fastest growth rates in the world -- 17 per cent a year -- as vast troves of minerals were discovered under the steppes.

Since then, Mongolia's bull market has crashed, Passin said, and the economy has slowed. But he is redoubling his efforts there, learning the difficult language and aiming to construct a set of world-class Mongolian corporations -- a project he has broadly likened to the empire-building of Genghis Khan.

The Genghis Khan trade

Passin is also wagering on distressed debt in the South Pacific. Firebird has been suing the tiny, destitute island nation of Nauru for repayment on about $US24 million of defaulted government-backed bonds, equal to about one-sixth the country's gross domestic product.

Firebird, which bought the bonds from the original creditors at a fraction of their face value, stands to make money if it wins. The hedge fund has been fighting in Australian courts to garnish Nauru's state bank accounts -- and briefly succeeded in freezing the accounts, pushing the country toward collapse.

"We will go to every corner of the world to find assets," he said.

Passin's North Korean investments may be his most contentious.

Firebird owns nearly half of a Mongolian company, HBOil, which entered a joint venture with the government of Kim Jong Un in 2013. The partnership gave the small company expansive rights to overhaul North Korea's primitive energy sector by opening 100 gas stations, restarting a derelict refinery and drilling for oil and gas.

The projects have yet to materialise. Companies have been searching for oil and gas there since the 1980s, and it remains unclear whether the country has any significant quantities.

Naemi, who is advising HBOil, believes there are deep reserves of oil -- perhaps as much as a billion recoverable barrels on land. But the current low price of oil means that if it exists, and can be extracted, it still might not be profitable.

Legal concerns

Passin's investment also raises legal questions. Alexandra Lopez-Casero, a sanctions lawyer at the Boston-based law firm Nixon Peabody, said the investment might violate US sanctions against North Korea absent a license from the Treasury Department in Washington. Other experts disagree, noting that the United States has not issued a blanket prohibition on investing in the North.

Passin said that Firebird had neither sought such a license nor needed one. He added that an expert had reviewed the venture for him and concluded that it was legal.

Some analysts worry that any oil exploitation would fortify Kim and others in the country's ruling elite. "The security risk is not small, as the oil business in DPRK is exclusively handled by the Communist Party and the military," said Keun-Wook Paik, an expert on North Korean oil at the research institution Chatham House, using the abbreviation for the Democratic People's Republic of Korea, the country's official name. "It will be a kind of Pandora box opening."

Passin dismisses such concerns.

He said business with North Korea would both benefit ordinary people and encourage the totalitarian state apparatus to become "more open and less harsh." Besides, he argued, if the West avoided commerce with unsavory nations, much of the world would be off limits.

"I believe there are companies that will emerge out of the DPRK that will be of lasting importance," he said. "That will survive for centuries."

The New York Times