Iraqi and Kuwaiti lawmakers traded accusations over UN-imposed reparations Iraq must make to its smaller neighbour, which it invaded in 1990 under former leader Saddam Hussein.

Kuwait insists Iraq remain under United Nations chapter seven rules, meaning Iraq must continue to pay 5 percent of its oil revenues to Kuwait and other claimants in war reparations.

The spat has prompted some Kuwaiti politicians to call for the withdrawal of their ambassador to Baghdad, whose appointment last year was hailed as a breakthrough in hitherto frosty ties between the two countries.

"The Kuwaiti stance is repulsive and reflects a vengeful spirit," said communist Iraqi lawmaker Hameed Mousa, reflecting a widespread view among Iraqi politicians, who say they are mulling sending a delegation to Kuwait to discuss the issue.

Kuwait wants Iraq to stay under chapter seven rules until issues including border demarcation and compensation for Kuwaiti property lost or damaged during Iraq's invasion are resolved.

"If the provocative comments continue from the Iraqi side, we demand the withdrawal of the (Kuwaiti) ambassador," Kuwaiti Islamist deputy Waleed al-Tabtabae told Reuters on Wednesday.

Iraq relies on oil revenues for almost all its income, and flagging output and a fall in oil prices from last year has hit its budget hard, exacerbating misgivings in paying reparations to Kuwait for an invasion conducted by a former Iraqi leader.

Iraq's majority and now dominant Shi'ite Muslims feel they were just as much victims of Saddam as Kuwait was.

"The resolutions were taken to weaken a regime regarded at that time as a threat against international peace and security. Continued compensation means the continuation of Iraqi suffering," said Jabir Habeeb Jabir, a member of the Iraqi parliament's foreign affairs committee.

Kuwaiti deputies say the decision to lift the chapter seven rules is up to the United Nations.

Ambassador Ali Al-Mumin, who in October became Kuwait's first ambassador to Iraq since the 1990 invasion, on Wednesday met Iraq's Prime Minister Nuri Al-Maliki, who called for calm.

Iraqi government spokesman Ali Al-Dabbagh said Iraq wanted calm, diplomatic solutions to issues outstanding with Kuwait, and that Iraq would do what it could to meet its demands, but in return wanted it to not "stand against" ending chapter seven.

"Chapter seven means Iraq is still considered a threat to international peace and security. For that reason Iraq wants to exit from chapter seven," he said. - Reuters