Iraq war reparations to Kuwait could be reduced: UK

UNITED NATIONS (Reuters) - Britain's U.N. envoy on Tuesday endorsed Iraq's request to lower its war reparation payments to Kuwait but said any reduction would need the blessing of both Baghdad and the Kuwaiti authorities.

After the 1991 Gulf war, the U.N. Security Council ordered Iraq to compensate countries that suffered as a result of its 1990-1991 occupation of neighboring Kuwait. Baghdad now must set aside 5 percent of its oil revenues for reparation payments, most of which go to Kuwait.

Iraq wants the council to cancel Iraq's obligation to pay reparations to Kuwait. It has asked U.N. Secretary-General Ban Ki-moon to support its request to slash or even cancel the payments so the money can be used for investments inside Iraq.

British U.N. Ambassador John Sawers told Reuters in an interview he hoped all outstanding issues between Iraq and Kuwait -- including missing Kuwaiti citizens and archives, access to the sea and other issues -- will be resolved.

"We would like to be able to move forward so that ... all these issues can be agreed within the context of the existing border and within the context of a reduction of compensation payments by Iraq to Kuwait," he said.

"But that requires a degree of understanding between Baghdad and Kuwait, which is what we (the Security Council) are trying to build," said Sawers, who is the council president for the month of August.

In a report to the 15-nation Security Council last week, Ban mentioned Iraq's bilateral discussions with Kuwait on reparations, including Baghdad's idea of "converting the outstanding payments into investments."

OPPOSITION FROM KUWAIT

Ban said he would "strongly encourage Iraq and other stakeholders" to come up with alternative solutions to Baghdad's reparation payments.

While he did not explicitly back a reduction in the payments to Kuwait, Ban said any new solution should "help Iraq meet its reconstruction needs and be beneficial to the region as a whole."

Iraq says the reparations are an unfair burden and wants the percentage reduced so it has more money for reconstruction and development projects. At a Security Council meeting on Iraq on Tuesday, Baghdad again called for annulling decisions requiring reparations under Chapter 7 of the U.N. charter.

"My country hopes that the Security Council will undertake its duty and enable Iraq to restore its international standing to that which it held prior to the adoption of Security Council resolutions, starting with resolution 661 of 1990," Iraq's U.N. envoy Hamid al-Bayati told the council.

Kuwait opposes ending Iraq's Chapter 7 status and has so far successfully lobbied the Security Council to support it.

But council diplomats say they may vote to lift the restrictions at the end of this year, which would enable Iraq to renegotiate the amount of reparations it pays to Kuwait.

Iraq has said it still owes $25.5 billion in reparations, $24 billion to Kuwait alone.

Relations between Iraq and Kuwait have become tense recently, with politicians in both countries trading accusations over the reparations.

Ban's report stopped short of declaring that Iraq no longer posed any threat to international peace and security, which was the official justification for the sanctions imposed on Iraq when the late Saddam Hussein was in power.

But Ban said Iraq in 2009 is not the same country it was before the U.S.-led invasion in March 2003 that toppled Saddam's government. Sawers made clear Britain believed Iraq no longer represented a threat to global peace and security.

(Editing by Todd Eastham)