Iraq Cabinet Approves $500 Million to End Kuwait Airline Dispute

Iraq’s Cabinet agreed to allocate $500 million from the budget to resolve a dispute with Kuwait over the debts of Iraqi Airways, State Minister Ali al-Dabbagh said.

The Cabinet asked parliament to approve the allocation of $300 million from the 2012 budget and another $200 million the following year, al-Dabbagh said in an e-mailed statement today. Prime Minister Nouri al-Maliki announced an agreement with Kuwait to end the dispute in March.

State-run Kuwait Airways Corp. has been seeking $1.2 billion in compensation for 10 aircraft taken during former Iraqi President Saddam Hussein’s invasion of Kuwait in 1990. Maliki agreed to pay $300 million in compensation to the carrier and another $200 million to establish a joint airline with Kuwait, which will contribute a similar amount.

Iraq still owes Kuwait about $20 billion as a result of that invasion. It is paying into a United Nations compensation fund even as its economy tries to recover from decades of conflict, sanctions and sabotage, nine years after the U.S.-led invasion that ousted Hussein.

To contact the reporter on this story: Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net