Work on a Palestinian water treatment plant, championed by the former prime minister, has been halted after Israel refused to allow construction materials into Gaza to finish the job.
Further delay risks what Mr Blair has called "a humanitarian catastrophe" as winter rains threaten to cause the existing facility to overflow, flooding the homes of more than 10,000 people who live nearby.
Mr Blair won public assurances from Israel last November that it would allow the final items needed to complete the £8?million project. But subsequent refusals by Israel to allow in enough cement means that all work has stopped.
Mr Blair, who has been criticised recently by Palestinian businessman for failing to stand up to the Israelis, declined to comment on Israel's actions.
His spokesman said that in Mr Blair's view the project was proceeding without problems even though the project manager in Gaza told The Daily Telegraph work had been halted.
Neither Mr Blair nor any of his full-time staff have been to Gaza since he began his role as Middle East mediator last June.
The reason for refusing the cement to pass was given by Israel as "security concerns".
However, the contractors insisted that they had provided full details, photographs and plans of where the cement would be stored and for what it would be used.
A spokesman for the Israeli co-ordination office responsible for items entering Gaza declined to comment.
The refusal meant work had now stopped on the project to drain the 60-acre Umm al Nasser lake. This has increased the risk of a disaster as the lake's level, swollen by winter rains, inches towards the point where it could overflow its banks.
A much smaller sewage lake, five per cent of the size of Umm al Nasser, broke through its retaining walls after the last winter rains, drowning five locals.
Sadi Ali, a sanitary engineer managing the project in Gaza, said: "We have prepared everything so when the cement arrives we are ready to pour it but until then the project is stopped.
"There is no doubt Mr Blair made a difference but here in Gaza it is one thing to get assurances from the Israelis and another for them to actually deliver on those assurances."
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