Kuwait

Kuwait is a small micro nation located southeast of Iraq.

Technology
Although Kuwait has great technological research, It is weak to the mighty power of Iraq.

Alliances
Neutrality will only get you killed by Iraq, alliances are the best option.

Tokyo-Tehran Pact

Best option since Iran is real close to you and they can fight Iraq if Iraq tries to invade you.

Axis

That might be a good idea, although it might not be if Iraq joins them.

The Warsaw Pact

Not a good idea, they'll make you communist or have you annexed by Iraq. That's unless you help in destroying Israel.