The war with Iran made Iraq suffered heavy loss of money and left its economy in ruins. Iraq owed about $80billion in debts to the countries that had supplied it with food and war equipment. The reconstruction of the country also required another $230billion. As a result, Iraq had to find ways to pay off the debts and saw Kuwait as a potential solution.
Iraq’s main source of income was the sale of oil. However, oil prices were falling due to over-production of some countries. As a result, quotas were set to prevent any further decline in oil prices. Kuwait and UAE, however, ignored the quota set and produced oil above the limit, causing oil prices to further decrease. As a result, Iraq lost a lot of revenue due to it, and felt that Kuwait was trying to wage an economic war on them leading to an increase in tension among both countries.
Dispute over territory
The unclearly-defined borders between Iraq and Kuwait resulted in both sharing the profitable Rumaila oilfield. Iraq then accused Kuwait of stealing oil from the Iraqi side, and demanded Kuwait to pay a compensation of $2.4bn for the oil they had supposedly taken. However, Kuwait refused to do so, claiming that they had only drilled from their side of the oilfield. This led to strained relations between the two countries, causing an increased in tension.
Bubiyah and Warbah Islands
When Kuwait inherited the strategically located Bubiyan and Warbah Islands from British, Kuwait had the potential to block off Iraq’s access to the Gulf, which would affect Iraq’s oil transportation. As a result, Iraq attempted to claim ownership of the Islands though force, which they failed. Subsequently, Iraq wanted to lease the islands from Kuwait, which both countries failed to reach a suitable agreement. This led to strained relations between the two countries, causing an increased in tension.
Please join StudyMode to read the full document