GENEVA, June 29: Kuwait and Saudi Arabia, who have lodged claims worth billions of dollars against Iraq for damage from the 1991 Gulf War, insisted on Tuesday that Baghdad must honour its debts to victims.

A day after the United States handed over sovereignty to an interim Iraqi government, the two oil exporting giants said there should be no interruption in the flow of payments to a United Nations-administered compensation fund.

A recent UN Security Council resolution said five per cent of Iraqi oil revenues must continue to go to Gulf War victims. But it laid down no mechanism to ensure compliance once Britain and the United States had transferred control of revenues to Iraq.

"Iraq has the ability and the means to compensate for all of the damages it inflicted on the claimant countries," declared Turki bin Nasser bin Abdulaziz, president of Saudi Arabia's meteorology and environment department.

Failing to hold an aggressor fully accountable would set "a dangerous precedent", the Saudi prince told a closed-door session of the Governing Council of the UN Compensation Commission (UNCC), according to his speech.

The UNCC has received claims valued at $350 billion from individuals, companies and governments for damages from Iraq's August 1990 invasion and seven-month occupation of Kuwait.

Saudi Arabia is seeking more than $28 billion for damage to its environment caused by Iraqi troops setting oil wellheads on fire as they fled a US-led coalition, Saudi officials said.

POLITICAL DEALINGS: The Saudi claim, which includes the cost of rehabilitating the coastline, fisheries and desert, is to be considered later this year along with environmental claims from Kuwait, Iran, Jordan and Syria.