updated 7/6/2008 8:33:38 AM ET 2008-07-06T12:33:38

The United Arab Emirates canceled all its Iraqi debt Sunday and moved to restore a full diplomatic mission in Baghdad by naming a new ambassador.

It's part of a recent warming between Iraq's Shiite-led government and its mostly Sunni Muslim neighbors. Washington has pushed Gulf states like the UAE to restore ties with the war-torn country. Jordan named an ambassador last week, and Kuwait and Bahrain say appointments are imminent.

The Emirates' official news agency quoted the country's president Sunday as saying the UAE was canceling all US$4 billion in debt owed by Iraq.

The announcement came as Iraqi Prime Minister Nouri al-Maliki was visiting the Emirates. An Iraqi government spokesman, Ali al-Dabbagh, confirmed his government was notified of the debt cancellation.

Al-Dabbagh also said Abdullah al-Shehi, the UAE's former head of mission in India, was named ambassador to Iraq. The country said last month that an appointment was upcoming.

The UAE withdrew its ambassador to Iraq after the 2003 U.S.-led invasion and after one of its diplomats was kidnapped and later released.

Sunni militant groups like al-Qaida in Iraq, mistrustful of Iraq's Shiite government, have warned Arab states not to open embassies in Baghdad. The capital's first major car bomb of the war struck the Jordanian Embassy, killing 19 people. Diplomats from Egypt, Morocco, Bahrain, Turkey and Sudan have all been either killed, wounded or kidnapped in Iraq.

U.S. seeks to blunt fears
The U.S. has sought to blunt fears among Sunni Arab countries like the Emirates and Saudi Arabia over Iran, the largest Shiite Muslim nation, which has been expanding its influence inside Iraq — also a majority Shiite country.

Al-Maliki chided his Arab "brothers" at an April conference of Iraq's neighbors in Kuwait, saying he found it "difficult to explain why diplomatic exchange has not taken place."

"Many foreign countries have kept their diplomatic missions in Baghdad and did not make security excuses," al-Maliki said at the time.

Iraqi officials have also been appealing for relief of at least US$67 billion in foreign debt — owned mostly to Arab countries that have been reluctant to forgive Iraq's belligerence during Saddam Hussein's regime.

In addition, the U.N. Compensation Commission says US$28 billion remains to be paid for Iraq's 1990 invasion of Kuwait. Iraq now gives 5 percent of its oil revenue to meet the compensation claims.

Last year, Saudi Arabia announced it would forgive the portion of Iraq's debt it holds, but the Iraqi government has said it has so far failed to do so. American officials have urged patience, saying debt relief takes time.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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