Kuwait and Iraq restored diplomatic relations on Monday, exactly 14 years after ties were severed when then Iraqi president Saddam Hussein sent his forces to occupy the small Gulf country.

Kuwait and Iraq restored diplomatic relations on Monday, exactly 14 years after ties were severed when then Iraqi president Saddam Hussein sent his forces to occupy the small Gulf country.

"The two sides discussed ways of boosting cooperation between the two countries in all fields and agreed to resume full diplomatic relations," said a joint statement issued after a visit by Iraqi Prime Minister Iyad Allawi.

Kuwaiti Foreign Minister Sheikh Mohammed al-Sabah said that ambassadors would be appointed in due course "because there are formalities" which must first be carried out.

But while many in the country's lively press hailed Allawi's visit, some Kuwaitis remained sceptical.

"The basis of building confidence between our neighbourly people is for the Iraqi government not to bring up the border issue and to admit to the mistakes committed in the past."

Memories of the Iraqi invasion have been hard to shake, especially for families of missing Kuwaitis. The remains of some of those Kuwaitis have been found in mass graves in Iraq.

Relief worker Farid Al Awadi said Kuwaitis are well aware many Iraqis still believe Kuwait should be annexed.

"This is a product of years of brainwashing," he said. "We know we are brothers, but we still feel hostility when it comes to our sovereignty."

Kuwaiti firms are enjoying huge business pickings from reconstruction contracts in Iraq now that the threat of Saddam that had overshadowed political and economic reforms is gone.

But some Kuwaitis say Iraq's new government must offer more guarantees that past disputes will not resurface.

"We should not easily forget the past when considering the future. Although the economic environment is now positive, we have to be careful and vigilant to protect it," said Thunayan Al Ghanim, treasurer at Bank of Kuwait and the Middle East.

Kuwait has begun a crackdown on suspected Al Qaida supporters accused of enlisting Kuwaiti youths to fight U.S.-led forces in Iraq and in Kuwait, which was a launch pad for last year's war against Saddam.