By Stephen Kalin

RIYADH--Under pressure from low oil prices, Iraq is seeking billions of dollars in debt relief from Kuwait and moving to bolster ties with Saudi Arabia, as the coronavirus pandemic compels Baghdad to court allies that could help it stave off an economic crisis.

Finance Minister Ali Allawi, who is also deputy prime minister and acting oil minister, said he was proposing that Kuwait delay or cancel some $3 billion that Iraq owes in reparations for the 1990-91 Gulf War, when dictator Saddam Hussein burned Kuwaiti oil fields.

Iraq stopped making payments in 2014 as it battled Islamic State militants who had seized control of a third of the country but resumed in 2018. Now, 3% of oil export revenue goes to wealthier Kuwait, which is also suffering from depressed oil prices.

"That will help our cash flow very significantly," Mr. Allawi said. "This together with other measures would help to stabilize the situation."

Iraq has avoided a major outbreak of the new coronavirus, with fewer than 150 deaths. But it faces an economic crisis as the pandemic further weakens demand for oil, sales of which account for more than 90% of state revenue, after a Saudi-Russian battle over market supply crashed crude prices.

Iraqi Prime Minister Mustafa al-Kadhimi, who formed a new government two weeks ago, dispatched his finance minister on the weekend trip aimed at resetting the country's position in the region.

In Saudi Arabia, Iraq sought to revive proposed investments in its electricity, telecom and agricultural sectors, and remove bureaucratic obstacles to commercial projects, Mr. Allawi said. And while Baghdad hasn't sought short-term budgetary support from Riyadh, it may do so in three or four months, he added.

"We are right now under severe financial stress, and this generates reconsideration of some of the original choices that we have made or that were imposed on us by circumstances over the last 17 years," he said.

The government media offices of Saudi Arabia and Kuwait didn't immediately respond to questions about Iraq's proposals.

Kuwait's state news agency said Mr. Allawi delivered a letter from Iraq's prime minister about supporting bilateral relations. The Saudi Finance Ministry said on Twitter that discussions focused on trade and investment.

The kingdom, with the United Arab Emirates, has wooed Iraq to combat rival Iran, which has amassed influence on Iraqi politics and business since the U.S.-led invasion in 2003. Their crown princes hosted Iraqi cleric Moqtada al-Sadr in 2017 after Riyadh reopened its Baghdad embassy following a 25-year freeze triggered by the Gulf War.

Then-Prime Minister of Iraq Haider al-Abadi met Saudi Arabia's King Salman in Riyadh, and the kingdom's then-energy minister, Khalid al-Falih, visited Baghdad. Saudi Arabia promised investments in a shattered economy, but little has materialized.

Mr. Allawi said a shift in regional ties wouldn't constitute a U-turn or come at other allies' expense but would likely be accompanied by political adjustments.

"It's not opening a completely new chapter," he said. "But it is opening hopefully different pages in that chapter."

Write to Stephen Kalin at stephen.kalin@wsj.com

(END) Dow Jones Newswires

May 24, 2020 05:43 ET (09:43 GMT)

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