Well he invaded for several reason
1. Kuwait had heavily funded the 8 year long Iraqi war against Iran. By the time the war ended, Iraq was not in a financial position to repay the $40 billion which it had borrowed from Kuwait to finance its war. Kuwait's reluctance to pardon the debt created strains in the relationship between the two Arab countries.
2. According to George Piro, the FBI interrogator who questioned Saddam Hussein after his capture (in 2003), Iraq tried repaying its debts by raising the prices of oil through OPEC's oil production cuts. However, Kuwait, a member of the OPEC, prevented a global increase in petroleum prices by increasing its own petroleum production, thus lowering the price and preventing recovery of the war-crippled Iraqi economy
3. Iraqi government justified its invasion by claiming that Kuwait was a natural part of Iraq carved off due to British imperialism.
4. At the same time the Iraqi military intelligence was receiving warnings about Israeli plans to attack Iraqi nuclear, chemical and biological weapons.
Kuwait being one of the 3 backers of Iraq's war with the Iran (the US and Saudia Arabia being the others) supported Iraq's war effort financially.
Since an Iranian journey to Mecca and Medina travels right through Iraq and Kuwait to Saudi Arabia...It was apparently understood that the Kuwaitis and Saudis were doing their part to defeat this Iranian effort with funding.
In effect, Saddam was the muscle protecting them in this case. Now in general terms, when someone is paid to provide defense or security for someone else it's always a payment for some service render and never a loan.
The Kuwaitis apparently were reneging...some suggested at the prodding of the US to go after Saddam for repayment. All the while the US is suggesting to Saddam when he appeals to us for intervention in the matter...that we have on position on the matter. Reports suggest Saddam even discussed with us the view that Kuwait doesn't actually exist and if they persist in pursuing repayment Iraq will have to consider the fact that Kuwait is actually a part of Iraq. We were mum on that.
Now how can a country like Kuwait actually threaten a country like Iraq? I mean, couldn't Iraq simply thumb their noses at Kuwait and tell them send your army up her to get your money if want it that bad all the while laughing at them??? Probably so. But the problem with having oil reserves and a neighbor who believes you owe them money is the prospect that they will side drill to tap your reserves to effect repayment that way. That's what set Saddam off.
That's why Saddam torched Kuwait's oil wells...and not his own.
The problem is, if the US didn't want those two at war or Saddam to invade Kuwait we could have easily prevented it as he requested our advice and help with the situation several times before it came to an invasion. Why didn't we simply convince him otherwise those many other times instead of eventually watching him invade them mount up a force to eject him?? Hell, GIVE THEM THE FUCKING $40b for him(if that's the accurate amount) as we could have easily spent that much money in an extended conflict with Iraq and not deaded up nearly as many people.
I guess naivety would assign it to just a monumental foreign policy blunder.