Iraq's U.N. Ambassador told the Security Council Thursday that his government hopes to reduce or cancel the remaining $25.5 billion it owes Kuwait in compensation for Saddam Hussein's 1990 invasion. Ambassador Hamid al-Bayati says his government has already paid more than $27 billion in compensation and needs the remaining funds owed to rebuild the war-torn country.

Ambassador Bayati told reporters that his government has sent a letter to both the U.N. secretary-general and the Security Council requesting a reduction in compensation costs owed to Kuwait.

"The letter of our minister to the Security Council and to the secretary-general requests a decrease in the percentage of five percent," said Hamid al-Bayati.

The five percent refers to the portion of Iraq's proceeds from the export sales of all oil and gas products that must be deposited into a compensation fund set up by the Security Council  in 1991. The fund is used to process claims and pay compensation to Kuwaitis as a result of the invasion and occupation of their country.

Iraq holds the world's third largest oil reserves, but sharply declining oil prices have cut the government's income drastically.  

Ambassador Bayati says the remaining debt would hurt Iraq's own reconstruction.

"Up until April 2009, Iraq has paid $27.1 billion of the total compensation for the invasion of Kuwait," he said. "However, there are $25.5 billion still due, which is a heavy burden on Iraq, which needs the money for services, reconstruction and development."

Ambassador Bayati said he has met with Kuwaiti officials about the issue, and they agreed the two sides would start bilateral meetings and negotiations.

The envoy also told the council that he hopes they will assist in lifting resolutions imposed in the wake of the 1990 invasion.  Bayati added that Iraq has met many obligations to Kuwait, including returning the remains of missing Kuwaitis found in Iraq.