Iraq on Tuesday approved a deal with Kuwait regulating the use of a shared waterway through which most of Baghdad's oil exports flow, which Iraq had accused its neighbour of attempting to cut off.

Control of the Khor Abdullah waterway is one of several outstanding issues between Iraq and Kuwait remaining from now-executed dictator Saddam Hussein's August 1990 invasion of the emirate.

Ali al-Alaak, cabinet secretary general, told a news conference that ministers approved the deal to regulate navigation in the Khor Abdullah, voicing hope that it would clear the way for talks on other unresolved disputes between Kuwait and Iraq.

"The agreement opened the door to discuss other unresolved issues between Iraq and Kuwait," Alaak said. He said the Kuwaiti parliament had approved the deal.

The Khor Abdullah waterway serves as Iraq's entrance to the Gulf, through which the vast majority of its oil exports flow.

In 2011, Baghdad began voicing concern that a Kuwaiti plan for a massive port would strangle its shipping lanes in the narrow waterway, but Kuwait has insisted the port will not affect Iraq.

Kuwait began construction on the container port in 2007 but Baghdad only raised objections to it in May 2011, a month after Kuwait's emir laid the foundation stone.

An Iraqi Shiite militant group, Ketaeb Hezbollah, had previously threatened to target firms working on the port project.

The issue is one of several the two countries are trying to resolve that remain from Saddam's 1990 invasion, with Iraq seeking in particular to end disputes in order to exit United Nations Security Council restrictions resulting from the assault.

Baghdad pays five percent of its oil and gas revenue into a special United Nations fund that pays compensation to Kuwait for its invasion and seven-month occupation of the emirate.