Kuwait's cabinet has cancelled a deal to form a $17.4 billion petrochemical joint venture with U.S. firm Dow Chemical, which has met with opposition in parliament, Kuwaiti television station Al Rai said on Sunday.

There was no immediate official confirmation of the report. The private station said in a news flash the cabinet had scrapped the deal as a result of the global financial crisis and its impact on the OPEC producer which no longer saw any benefit from the joint venture.

State-run Petrochemical Industries Co (PIC) signed a deal earlier this month with Dow, the largest US chemicals maker, to launch the joint venture, K-Dow Petrochemicals. PIC was due to pay Dow $7.5 billion for its stake.

The deal was especially significant for Dow, as it planned to use the proceeds from it to repay a large part of the $13 billion in debt it will have to shoulder once its acquisition of Rohm & Haas closes in early 2009.

Dow and other chemical makers around the globe face one of the worst slumps ever in chemical demand, with recession in most developed countries and a sharp slowdown in emerging economies which have been the sector's main drivers of revenue growth in recent quarters.

The deal has angered some Kuwaiti parliamentarians who say the project is not economically viable in light of the global financial crisis and slumping petrochemical sales.

Last week, deputies of the liberal Popular Action Bloc threatened to question Prime Minister Sheikh Nasser al-Mohammad al-Sabah unless the government scrapped the Dow deal.

A move to question the prime minister on another issue prompted a cabinet resignation in November, but the country's ruler re-appointed Sheikh Nasser, his nephew.

The deal, part of Dow's strategy to reduce its exposure to the cyclical nature of the commodity chemicals business, was announced in December 2007.

Kuwait and Dow lowered the value of the joint-venture by more than 8 percent to $17.4 billion earlier this month after the Gulf Arab state had asked to cut its contribution in light of a sharp slowdown in global demand.-Reuters