China seems to be engaged in perpetual conflict with virtually all its neighbors in East Asia over a number of issues, particular territorial sovereignty.

But in recent weeks, a bizarre skirmish has erupted in a remote – and largely ignored -- corner of Southeast Asia that does not directly involve the mandarins of Beijing.

For the past three weeks, Malaysian government troops have been attacking – sometimes with an air bombing campaign – up to 300 members of a mysterious armed Filipino group in Sabah state on the northeastern corner of Borneo, a huge island shared by Malaysia, Indonesia and the tiny kingdom of Brunei.

On Thursday, the Malaysian government of Prime Minister Najib Razak rejected a ceasefire offer from the rebel group, with Razak demanding an “unconditional surrender.”

The crisis appears to be worsening – and this saga features a strange, complex and confusing back-story which encompasses a bewildering and diverse number of players.

Rich in palm oil, agriculture, gas and petroleum, Sabah has endured numerous masters and periods of foreign occupation over the centuries.

The current military conflict in Sabah is directly tied to questions about its rightful sovereignty.

The territory was once ruled by the Sultanate of Sulu, but the British were permitted to establish a trading post in the mid-18th century. By 1878, Northern Borneo (comprising present-day Sabah) became a British protectorate, either leased or ceded by the Sulu Sultanate, in exchange for a yearly sum of money.

It is that controversial 1878 pact that has muddied the waters with respect to who really is entitled to Sabah.

“The British claim to North Borneo was subsequently recognized by the Spanish (who controlled the Philippines then), and in 1885 the Spanish agreed to relinquish their claim, as well as the sultan of Sulu's claim, to sovereignty over northern Borneo,” said Nicholas Heras, an analyst at the Jamestown Foundation and at the private firm 361 Security.

“Following the onset of U.S. control over the Philippines [in 1898], American and Filipino diplomats continually attempted to regain control over northern Borneo for the Philippines, an effort that was rebuffed by the British, who made the area a colony under direct control of the British king through the charter of the North Borneo Company in 1946.”

In 1963, Sabah became part of the federation of Malaysia (making the leaders of the Philippines, Indonesia as well as the remnants of the Sulu sultanate quite unhappy). However, Sabah retained some measure of autonomy from Malaysia.

The Philippines, meanwhile, have never really relinquished their claim to Sabah.

Now, 50 years later, the ancient Sultanate of Sulu has reared its head – its descendants (or followers) have apparently claimed Sabah for themselves, triggering Malaysia’s aggressive military reaction.

"A majority of these [Sulu sultanate] fighters are members of the Tausug ethnic group, which is predominant in the southern Filipino island chains,” said Heras.

Established in 1457, the so-called Royal Sultanate of Sulu Dar al-Islam lasted until 1917 – it ruled a number of islands in the Sulu Sea, as well as parts of southern Philippines and northern Borneo.

The sultanate barely even exists today (except in the minds of a handful of zealots who still pay homage to the sultan’s progeny). Some of them, dubbed the "Royal Army of the Sulu Sultanate," seized a village last month in Sabah to declare Filipino sovereignty over the region. Reportedly, this armed militant organization was dispatched by a man named Jamalul Kiram III, the latest claimant to the old throne.

The Sulu islands are now part of the Philippines – although according to Al Jazeera, the Malaysian government in Kuala Lumpur still pays a nominal fee to the Sulu sultanate for Sabah.

The current military episode in Sabah, perhaps minor in the grand context of East Asian affairs, nonetheless exposes cracks in the relationship between Malaysia and the Philippines.

Harry Roque, a law professor at the University of the Philippines, wrote in the Philippine Daily Inquirer that the two nations have “precarious” bilateral relations, including the dispute over the sovereignty of Sabah, which he described as “unresolved.”

“The arrival of the armed men in Sabah sends the message that the Sultanate of Sulu wants its property back,” Roque said of the latest imbroglio.

“This would mean that while we [Filipinos] may not assert a superior claim to the territory during the pendency of the Sabah lease, our nationals, claiming to be its owners, now want their property back.”

The current government in Manila, however, does not openly endorse the actions of the "Sulu Sultanate" soldiers and has called for the militants to lay down their arms.

Indeed, the government of the Philippines has offered to transport the Sulu (i.e., Filipino) fighters back to the Philippines in exchange for a ceasefire and cessation of hostilities in Sabah. Malaysian and Filipino naval forces are also cooperating in maintaining a blockade of northeastern Borneo.

But as officials from both sides have failed to find a solid resolution, the conflict in Sabah is at a standoff, which has already killed more than two dozen people, including a number of Malaysian policemen.

"The government has to take the right action in order to preserve the pride and sovereignty of this country," Razak said in a statement about the assault by his troops.

Complicating matters is that both major players in this strange saga, the Philippines and Malaysia, are facing crucial elections, raising suspicions that the chaos in Sabah might have been engineered by opposition forces in both countries to undermine the incumbent rulers.

Indeed, Razak may have to postpone the Malaysian vote over the gathering crisis in Sabah.

“The security situation in Sabah is already considered to be an impediment to holding the elections, which could reduce outside investment -- which is extremely important to the continuing economic health of Malaysia -- due to a perception of instability in the country,” Heras said.

Razak, Heras noted, is already receiving criticism from his political opponents for what is being viewed as a potentially disastrous breach of national security caused by the Sabah conflict, and the threat of the disruption of Malaysia's important palm oil trade, as well as hurting its emerging natural gas and oil fields, and coal mining operations.

Meanwhile, across the waters, Benigno Aquino III, the president of Philippines, has explicitly accused opposition forces in his country of supporting the Sulu forces to ruin his party’s chances in congressional elections due for May.

"The family of Sultan Jamalul Kiram could not possibly have settled on this course of action alone," Aquino said. "All those who have wronged our country will be held accountable."

Aquino’s government is pursuing peace deals with Filipino Muslim rebel groups – including the Moro National Liberation Front -- who have long agitated for autonomy in southern parts of the country. According to some reports, defected MNLF members could be involved in the Sabah violence.

Heras said the Sultanate of Sulu still maintains some popular support amongst the primarily Muslim communities of the southern Philippine Islands.

“Successfully prosecuting the claim to Sulu has become an important objective of the most powerful Filipino political and military movements in the southern Philippines,” he said.

Indeed, Muslim separatists -- including the MNLF as well as the Moro Islamic Liberation Front -- in the southern Philippines are also significant players in this drama.

“MILF is in the process of negotiating with the government of the Philippines towards establishing an autonomous Moro region, called Bangsamoro, in the southern Philippines,” Heras noted.

And who helped broker a peace agreement between the Manila government and these Muslim groups? Why, none other than Malaysia itself -- further complicating the intrigue surrounding Sabah.

Moreover, MNLF and MILF are also at odds with each other.

There is some speculation by Malaysian and Filipino commentators that the MNLF is actively supporting the invasion of Sabah behind the scenes to draw attention and prestige away from the MILF's negotiations for an autonomous southern region of Bangsamoro with Manila, Heras indicated.

“It was the MILF, not the MNLF, that ultimately forced the government of the Philippines to agree to self-determination for the Moro region,” he said.

The Sabah conflict could also potentially lead Malaysian, Western (and, yes, Chinese) companies to worry over their huge investments in Sabah’s oil and gas projects and other commercial enterprises.

Sabah accounts for at least one-fourth of Malaysia’s total palm oil production – much of which is transported to China.

“The palm oil industry is very important for Sabah's economy, and Sabah is Malaysia's largest producer of crude palm oil, estimated to account for a quarter to a third of the country's palm oil,” Heras stated.

“China is the largest importer of Sabah's palm oil products, followed by India and Indonesia. As a whole, Malaysia is consistently the second or third largest producer of palm oil in the world.”

But continuing conflict is reportedly delaying the production of processed palm oil products in Sabah, and a lengthy conflict could severely damage the long-term health of the industry there.

Further complicating matters is the large number of Filipinos who have illegally immigrated to Sabah across the waters over the past four decades or so – some 800,000 of them now reside in north Borneo. As a result, the Sulu Sultanate gunmen can easily blend in with the local populace for the long haul, if necessary.

Reports have recently emerged that Malaysian Prime Minister Razak’s ruling United Malays National Organization party even offered the illegal Filipino immigrants citizenship in exchange for votes in upcoming elections.

In addition, a worsening of the insurgency in Sabah would present the government of the Philippines, particularly President Aquino, with the difficult choice participating militarily against his fellow Filipinos in Sabah and inflaming public opinion in the southern Philippines or doing nothing and risking the ire of Malaysia, Heras explained.

Indeed, the Philippines, despite its conflict with its wealthier neighbor, is economically dependent on Malaysia.

Malaysia has become an important investor in the Philippine economy and an important destination for employment for Filipino workers who send remittance income back to the Philippines.

One also cannot forget the omnipresent Chinese in the Sabah equation.

Chinese companies, Heras said, are very interested in Sabah, and are heavily exploring investments in coal mining, palm oil processing, hydroelectric power, ecotourism, and environmental rehabilitation industries.