Glucose (the form sugar travels in the bloodstream), in high concentrations injures both blood vessels and nerves. In doing so, it inflames and damages said blood vessel, difficulting blood circulation (that is the diabetic vasculopathy).
Now, is important to know that nerves are a living tissue, and they need nutrients. This nutrients, specially in bigger nerves, comes from *blood vessels* (vasa nervorum).
So now the nerves are not just being damaged due the high levels of sugar in blood, but the same damage in the blood vessels affects te vasa nervorum (and nerves dont get the needed nutrients). This is the diabetic neuropathy
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