UPDATE 1-Kuwait deputy PM to visit Iraq, first since 1990

Wed Feb 18, 2009 8:01am EST

(Adds details)

By Aseel Kami

BAGHDAD Feb 18 (Reuters) - Kuwait's deputy prime minister will go to Iraq in March in what will be the first high-level visit of a Kuwaiti official since Saddam Hussein's 1990 invasion of the tiny Gulf state, an Iraqi official said on Wednesday.

Sheikh Mohammad al-Salem al-Sabah, who is also Kuwait's foreign minister, will visit as violence unleashed by the 2003 U.S.-led war that toppled Saddam begins to wane and Iraq and Kuwait reach preliminary deals over shared border oil fields.

"It's (the visit) supposed to be during next month, in March," said the head of the media department in the Iraqi Foreign Ministry, Haider al-Barrak.

Iraq was driven out of Kuwait in 1991 by a U.S.-led coalition in the first Gulf War.

Under U.N.-imposed peace terms, Iraq must pay 5 percent of its oil income in reparation to Kuwait and other nations.

Ties between Kuwait and Iraq have improved since the fall of Saddam, with Iraqi officials regularly visiting their tiny neighbour and Kuwaiti firms starting to expand to Iraq.

But the countries have yet to settle issues over demands by Baghdad to cancel loans Kuwait made to Iraq during its war with Iran in the 1980s.

Many in Kuwait are still bitter about the 1990 invasion, and parliament has signalled it would not approve a debt cancellation.

Kuwait has also said that any changes to the reparations that Iraq has to pay for the invasion must be decided by the U.N. Security Council.

Kuwaiti firms are lining up for opportunities as Iraq seeks to rebuild after years of sectarian bloodshed and insurgency.

Major Kuwaiti firms such as Agility, the Gulf's biggest logistics provider, and several banks are active in Iraq. National Bank of Kuwait, the country's biggest bank, said this week it wanted to boost its Iraq operations.

The Shi'ite Muslim-led government that now rules Iraq has complained that its mainly Sunni Muslim Arab neighbours have given it the cold shoulder since Saddam, a Sunni, was ousted. But diplomatic ties have slowly improved.

Kuwait's first ambassador to Iraq since 1990 took office in October and Jordan's King Abdullah became the first Arab leader since the fall of Saddam to visit Baghdad last August.

No Arab country had an ambassador posted in Baghdad from 2005 -- when Egypt's envoy was kidnapped and killed -- until September 2008. (Additional reporting by Khalid al-Ansary in Baghdad; Additional reporting by Ulf Laessing in Kuwait City; Writing by Michael Christie; Editing by Richard Williams)