The Iraqi government is considering dissolving state-owned Iraqi Airways, Transport Minister Amer Abdul-Jabbar said on Tuesday, amid a row with neighbouring Kuwait over war reparations.

Baghdad and Kuwait have been locked in a long-running dispute over billions of dollars in reparations from Iraq, including some $1.2 billion related to aircraft and parts seized during former Iraqi dictator Saddam Hussein's 1990-91 invasion of Kuwait.

An aide to Prime Minister Nuri al-Maliki told Reuters the cabinet, or Council of Ministers, had decided on Tuesday to dissolve the flag-carrier.

But Transport Minister Abdul-Jabbar said the decision was not final and that the cabinet would meet advisers on Wednesday to discuss the issue.

'After the meeting we will announce whether or not we will dissolve the company,' he told Reuters.

Iraqi Airways has regular flights to Beirut, Dubai, Tehran and other cities. Last month it made its first commercial flight to London in 20 years, only for a lawyer for the Kuwaiti authorities to try to seize the plane on landing.

The lawyer for state-owned Kuwait Airways said last month the airline had obtained an order from the High Court in London on April 27 that including freezing the assets of Iraqi Airways worldwide 'subject to frequent judicial review'.

The ruling required the director general of Iraqi Airways to provide a statement on the airline's assets and remain within the jurisdiction of the court, plus have his passport seized. He was later allowed to leave Britain.

Abdul-Jabbar said the Kuwaiti government had been escalating the Iraqi Airways battle in recent days.

'Our planes that land in Sweden, London and Germany, they are blocking supplying them with food, fuel and water,' he said.

'We have stopped our flights. What will the Kuwaitis get?' he said. 'If we announce the bankruptcy of our airline what will the Kuwaitis get?”

'We can establish another airline company and put an end to this case. With this, the Kuwaitis will get nothing,” he added. – Reuters