Iraq offers Kuwait $150m in bid to resolve airline dispute

30 May 2008

Baghdad reviews business opportunities in effort to settle compensation claim.

The Iraqi government has offered to pay Kuwait $150m in the latest high-level attempt to resolve the dispute between the two countries’ national airlines.

Kuwait Airways was also offered additional business opportunities by Baghdad, during a series of meetings in late May.

The initial discussions were attended by the Kuwaiti ministers of foreign affairs, finance and communications, and the Iraqi ministers of finance and national security. The Emir of Kuwait Sheikh Sabah al-Ahmad al-Jabir al-Sabah, contributed by telephone.

The offer falls far short of Kuwait Airways’ claim for $1.2bn in compensation arising from the theft of aircraft and equipment during the 1990 invasion of Kuwait. Following Iraqi Airways recent $5.5bn order for new planes, Kuwait has threatened to seize the aircraft to settle the debt (MEED 29:2:08).

The latest offer has not been rejected outright, but neither side expects it to be accepted in its present form.

“They [the Iraqis] need to prove they are serious about these negotiations and make a serious offer,” says one source on the Kuwaiti side.

Iraq has invited a Kuwaiti delegation to Baghdad for further talks.

Kuwait Airways does not expect to recoup the entire $1.2bn in cash, and the possibility of Kuwait being given business opportunities across other sectors in Iraq has been mooted.

“It is recognised by both parties that Kuwait does not have any opportunities in any sectors in Iraq because of this issue,” says a source close to the government. “As Iraq opens up aviation and other sectors for investment, both sides recognise this dispute is getting in the way.”

Iraqi Prime Minister Nouri al-Maliki recently approved proposals to invite private investment in the country’s aviation sector.

Under the plans, the nation’s airports would be run by private businesses, with the government retaining ownership. Similarly, Iraqi Airways’ cargo and ground handling divisions would be opened up to outside management, along with the refuelling, maintenance and catering units.

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