Manama: Kuwait's Prime Minister Shaikh Nasser Al Mohammad on Wednesday discussed with his Iraqi counterpart Nouri Al Maliki in Baghdad "outstanding" issues between the two countries, the Iraqi news agency reported.

Shaikh Nasser and Al Maliki held the meeting a short time after the Kuwaiti prime minister arrived in Baghdad in the first visit by a senior Kuwaiti official since August 1990 when the then Iraqi ruler Saddam Hussain invaded his neighbour to the south.

The late Shaikh Saad Al Abdullah Al Sabah was the last Kuwaiti minister to visit Baghdad in 1989.

According to the official news agencies of the two countries, the visit by Shaikh Nasser with a high-profile delegation was to discuss bilateral relations, ways to strengthen them in all fields and "outstanding" issues.

An Iraqi official said that the meeting agenda included discussion borders demarcation and the issue of financial compensation.

Kuwait News Agency (Kuna) said that Shaikh Nasser also wanted to congratulate Al Maliki on the formation of the new government.

The Iraqi cabinet was approved by the country's parliament on December 21, after more than nine months of political bitter standoffs pitting the country's leading political formations against one another.

Under international sanctions adopted after the liberation of Kuwait in 1991, Iraq still pays five per cent of oil sales into a reparations fund for Kuwait.

Kuwait has received about $13 billion (Dh47.8 billion_ in reparations, but is demanding that Baghdad pay another $22 billion.

Kuwait also wants Iraq to return property stolen during the six-month occupation and provide explanations about the fate of hundreds of Kuwaitis who have been missing since the invasion.

Iraq, which has been the target of about 70 UN resolutions since the August 1990 invasion, has been pushing for an end to all of them, arguing that the financial compensations were crippling its development.

However, UN Secretary General Ban Ki-moon stressed last month when some of the sanctions were lifted that Iraq must work to agree on a border with Kuwait and settle a dispute over war reparations if all sanctions are to be lifted.

Kuwait's government said that "a commitment to the serious and full implementation of Security Council resolutions related to the situation between Iraq and Kuwait will close all files and settle outstanding issues."

"This will also lay foundations for strong relations based on the respect of sovereignty and independence and the principle of good neighbourly relations and non-interference in domestic affairs," the government said.

Shaikh Nasser's historic visit also comes as the two countries seek to contain a brewing source of tension after a Kuwaiti officer was killed in a shootout between Kuwaiti coastguards and Iraqi fishermen near Al Bubyan island and an Iraqi boat was sunk.

Kuwaiti authorities said that the incident happened when an Iraqi boat entered Kuwaiti waters and refused orders from the Kuwaiti coast guards to stop.

The Iraqi government expressed regrets over the death of the officer and pledged to investigate the incident.

However, Iraqi MP Suzanne Al Saad said that the Iraqi fishermen were attacked in Basra and that the "violation of the Iraqi sovereignty by Kuwaiti forces was unacceptable."