Kuwait-Iraq

=Snapshot= As of mid-2011, Iraqi-Kuwaiti relations remained politically charged and contentious, with disputes lingering over several contentious issues, including: the development oil and gas fields near or crossing the border; finalising their land and sea boundary, which has been unclear since Iraq's 1990 invasion of Kuwait; and agreeing to a price tag for reparations for Saddam Hussein-era grievances.

Relations between Baghdad and Kuwait have made substantial progress in some areas. Kuwait re-opened its embassy in Iraq in 2008 after nearly 19 years of broken diplomatic relations between the two countries, while the Consulate of Iraq was opened in Kuwait in 2010. Nevertheless, the outstanding problems continue to lead to periodic tensions in the bilateral relationship.

=Cross-border fields and territorial disputes=

Cross-border fields
One of the immediate reasons for Iraq's invasion of Kuwait in August 1990 was Saddam Hussein's allegation that Kuwait was drilling horizontally across the agreed international borders of the Rumaila oil field, effectively stealing Iraq’s oil.

As of late 2012 there remained potential for disagreement over access to fields in border zones. The Iraqi government announced in December 2011 that there were 10 oil fields in frontier regions that still needed an international boundary drawn between them, and that oil would be extracted from these fields only after finding joint mechanisms between the countries. There has never been unitisation of these fields, meaning that the Iraq and Kuwait have never agreed to an equitable division of the fields' oil based on a technical assessment of how much of the reservoirs lie under each country. A high rate of production on one side of the border essentially sucks the oil from the other side and damages the reservoir, and unitisation of these fields would preserve the life of the reservoirs and allow both sides to recover more of the resources, according to US officials in a leaked diplomatic cable from 2009. The Iraqi oil ministry formed a Border Committee in 2007 to examine all fields and structures adjacent to and crossing Iraq's borders, including those with Kuwait, but the lack of agreement on this issue remains a sore point, according to the cables.

Territorial disputes
Among the fundamental border issues between Iraq and Kuwait is the latter's desire for the Iraqi government to formally recognise the international border as demarcated by the United Nations in 1993.

Maritime issues are a major point of friction between the two sides. Access to Iraq's only significant commercial port, at Basra’s Umm Qasr, is via the narrow northern Persian Gulf and through the Khor Abdullah waterway, which Iraq shares with Kuwait. Over three quarters of Iraq's oil exports flowed through pipelines in this area as of mid-2009, and Iraq's efforts to strengthen its economic lifeline have been hampered by the lack of agreement with Kuwait on a maritime boundary.

Tensions were raised when Kuwait began building its $1.1 billion Mubarak al-Kabir port on Bubiyan Island, just a few kilometres from Iraq’s planned $4.6 billion Grand al-Faw terminal. The Mubarak port will directly compete and limit the traffic flow to al-Faw, and congestion could affect oil tankers sailing to Iraq's nearby al-Basra and Khor al-Amaya oil terminals. As of late-2011 there were worries in Iraq that the Mubarak project could cause the country to lose up to 60 percent of its maritime traffic – mostly the larger cargo ships that already struggle to dock in Umm Qasr, the country’s only deep-water port.

Though the Mubarak port officially lies within Kuwaiti borders, its location has angered Iraqi politicians, workers and tribal leaders, with Transportation Minister Hadi al-Ameri saying in mid-2011 that the Mubarak Port "demonstrates the clear intention of Kuwait to block shipping lanes from Iraqi ports." The construction of the port has prompted militant groups in southern Iraq to threaten to attack targets inside Kuwait. In August, 2011 the Shia militia Kataeb Hezbollah fired rockets into Kuwait, and warned further attacks would follow if work on the port continued. The leader of Iraq's Ghatarna tribe, meanwhile, warned that if the Kuwaiti project went ahead, “the clans will take the law into their own hands”.

=Reparations for 1990 invasion=

Kuwait claims over $20 billion in reparations owed from Iraq's 1990 invasion. Iraq has agreed to continue setting aside 5 percent of its oil sales for this purpose, but has argued that the $20 billion figure is excessive. The United Nations' Chapter VII sanctions on Iraq, which had supervised and enforced the compensation fund, expired on 30 June 2011 and the two sides failed to subsequently establish a new mechanism for the payments. According to Iraq Oil Report, without an agreement Kuwait could take advantage of the absence of legal protection for Iraq's funds, which were removed when sanctions ended, and try to seize the funds in court.

Remaining issues to be resolved before Iraq can be considered for full relief from Chapter VII sanctions, as of December 2011, include: the restitution of stolen property from Kuwait's national archives, the identification and repatriation of citizens who died as a result of the occupation, and an official statement by Iraq that it would not attack Kuwait in the future.

Kuwaiti Airlines was also owed $1.2 billion by Iraqi Airlines for planes and parts a court ruled Iraq had stolen in the 1990s, a row which was part of the broader dispute. However in October 2012 the two countries reached an agreement under which Iraq would pay Kuwait $300 million in cash and invest $200 million in a joint airline venture in return for Kuwait lifting legal actions against Iraqi Airways.

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