A parliamentary source said on Wednesday that Kuwait is asking the United States to pay $500 million for fuel it supplied to the US army after the US-led war on Iraq two years ago.
But Washington has said it will pay less than one-third of the amount, the source said on condition of anonymity.
The London-based pan-Arab newspaper Al-Hayat said on Wednesday that the dispute was disclosed a few days ago by Islamist MP Nasir al-Sana during a meeting with his voters.
Al-Sana said that before and during the Iraq war, Kuwait supplied the US army with fuel worth $450 million free of charge, its contribution to the overthrow of the government of Saddam Hussein.
Supplies continued after the war and the emirate recently demanded payment of $500 million after calculating the amount at a preferential price of $21 a barrel, al-Sana was quoted as saying.
US Defence Secretary Donald Rumsfeld responded with a tough-worded letter saying that Washington had liberated the emirate from Iraqi occupation in 1991, and because it enjoys a fiscal surplus there is no need to demand the payment.
Annoyed by the harsh response, the Kuwaiti government summoned US Ambassador Richard LeBaron in protest.
Later, the US administration offered to pay $7 a barrel, al-Sana added.
Rulership of Kuwait was restored
to al-Sabah family by US in 1991
Al-Sana's account was confirmed by the parliamentary source, who said Kuwait may soon dispatch its foreign and energy ministers to Washington to settle the dispute.
Some 25,000 US troops are stationed in Kuwait, which also served as a launchpad for the US-led invasion of Iraq in March 2003.
US-led forces in Iraq use the emirate as a transit point during rotations. They also use Kuwaiti ports, air and naval bases regularly almost free of charge.
Kuwait is tied in a 10-year defence pact with the United States which expires in 2012.