Before the invasion of Kuwait, Iraq claimed that Kuwait was exploiting Iraqi oil reserves by using slant drilling techniques to cross the border between the two countries. In addition, Iraq owed Kuwait a substantial debt from the Iran-Iraq War and Kuwait refused to forgive that debt.
The friction between Iraq and Kuwait began during the 1980s, when Kuwait and Iraq allied against Iran. Kuwait lent Iraq around $14 billion to finance the war, which ultimately prevented Iran from expanding its influence into the rest of the Middle East. Saddam Hussein argued that the debt should be forgiven, since ultimately the country's actions had protected Kuwait from Iran, but Kuwaiti leaders disagreed. Kuwait further inflamed the situation by pushing for higher oil output quotas, reducing the price of oil and reducing Iraq's ability to pay off the country's debt.
Tensions came to a head over the Rumaila oil field. The field lies mostly in Iraq, but the southern tip of the field is in Kuwaiti territory. During the 1980s, Iraqi production in the field decreased sharply while Kuwaiti production increased. Iraq claimed that Kuwait was drilling into deposits on the Iraqi side of the border, violating the country's territorial rights and stealing mineral resources. As financial pressures mounted against Iraq, Saddam Hussein decided an invasion was necessary to correct the problem.