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UPDATE 2-Kuwait's ruler dissolves parliament, elections loom

* Sixth dissolution since early 2006

* Parliament had been unable to meet

* Fresh elections within 60 days

(Add detail, background) By Sylvia Westall

KUWAIT, Oct 7 (Reuters) - Kuwait's ruler ordered thedissolution of parliament on Sunday, a senior governmentminister said, opening the way to a parliamentary election inthe major oil-producing Gulf Arab state after months ofpolitical deadlock.

The emir, Sheikh Sabah al-Ahmad al-Sabah, had been widelyexpected to take the decision following a cabinet request todissolve the assembly. Elections now need to be held within 60days under constitutional rules.

Kuwait, a regional U.S. ally, has a relatively openpolitical system by Gulf standards and has avoided an uprisinglike those that have ousted leaders in four Arab states sinceearly last year.

But tensions have grown between its elected parliament andhand-picked government. The emir, who has the final say in stateaffairs, picks the prime minister, who in turn selects acabinet.

"The emir issued a decree to dissolve parliament," statenews agency KUNA said, citing Information Minister SheikhMohammad al-Mubarak al-Sabah, who handles cabinet affairs.

The last parliamentary elections were in February andopposition Islamist and tribal candidates performed strongly.They formed an opposition bloc that put pressure on thegovernment, which is dominated by the Al-Sabah ruling family.

The opposition pushed two government ministers from theirposts during that legislature.

Political upheaval has held up investment projects andeconomic reforms in the wealthy OPEC member state. This is thesixth dissolution of parliament since Sheikh Sabah came to powerin early 2006.

INVESTMENT STALLED

The parliament was last broken up in June by Kuwait's topcourt over a technicality. The old assembly that the courtreinstated had been unable to meet because of a boycott by MPs.

The turmoil has held up a 30 billion dinar ($108 billion)economic development plan and this year's phase of the projectwas rejected by opposition deputies in April.

The plan is supposed to provide a series of infrastructureprojects including a new airport terminal, new oil refinery andhospitals, and is aimed at diversifying the oil-reliant economyand drawing in foreign investment.

The latest political row had frozen parliamentary debate -the 2012 assembly was not even able to approve a budget for thecurrent financial year.

In a separate ruling last month, Kuwait's top court rejecteda government bid to change voting boundaries, leaving it withouta clear long-term option to resolve the political crisis.

The ruling suggested that when a new assembly is elected itwill likely have a similar make-up to the one elected inFebruary and could prove just as challenging to the government.

Opposition lawmakers and political activists have held aseries of rallies in recent weeks outside parliament, numberingthousands of people, and have called for an elected governmentand a more transparent political system.

Political parties are banned in Kuwait so MPs form blocsbased on policy and family ties.

(Editing by Andrew Torchia and Jon Hemming)

((sylvia.westall@thomsonreuters.com)(+965 2240 8945)(ReutersMessaging: sylvia.westall.thomsonreuters.com@reuters.net))

Keywords: KUWAIT POLITICS/DISSOLUTION

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