The latest talks aimed at resolving the dispute between the national airlines of Kuwait and Iraq typify the current state of relations between the two neighbours as they try to heal old wounds: acrimonious, mistrustful, and wary of giving an inch, yet aware that both have much to gain from a swift resolution.

Following an 18-year search for justice and compensation after Kuwaiti planes and equipment were stolen during Iraq’s invasion of its neighbour in 1990, Kuwait is driving a hard bargain. Pressure from Washington to drop the $1.2bn claim agreed in the UK courts has been scornfully dismissed – there are too many in the Kuwaiti delegation with bitter memories of the invasion to be bounced into a poor deal.

Moreover, Baghdad damaged its argument by unveiling a $5.5bn order for 50 new planes earlier this year. Iraq can no longer claim, as it has for years, that it does not have the money to repay the debt. In this context, the $200m and uncosted revenue-sharing package put forward is derisory.

At the same time, Iraq has itself become frustrated, accusing Kuwait of grandstanding – criticising the offer without officially rejecting it or suggesting an alternative. Iraq is now asking that Kuwait makes a counter offer, no matter how extreme, over which the two sides can haggle.

At some point, the posturing has to stop and a deal be made. Both airlines wish to privatise, and this process is being held back while the dispute continues. The companies are in poor financial shape and desperately need an injection of private investment. If a firmer value could be placed on the package, a revenue or code-sharing deal between the airlines could be hugely beneficial if they are to compete in the booming Gulf market.

In aviation, as in so many other sectors, the future of Iraq and Kuwait lies in co-operation, but both sides will have to swallow their pride to achieve it.