A painting believed to be "The Naked Woman" by Pablo Picasso, recovered in a raid in Hillah, about 60 miles (95 kilometers) south of Baghdad.

It was presented as a coup for the Iraqi authorities – the seizure of a stolen Picasso from a village hawker who had no idea that his loot was priceless.

Tuesday's raid by the Iraqi army's special forces unit in a town south of Baghdad was also seen as a diplomatic success, a rare chance for Iraq to mend a bridge burned by Saddam Hussein in 1990 when his forces returned from their invasion of Kuwait with plundered treasure worth untold millions.

But tonight the art world was casting doubts over the provenance of the painting known as The Naked Lady, with the Louvre disowning the find and no one else prepared to claim it as authentic.

Folded into quarters, and with several apparently tell-tale words inked on the back, the canvas appeared to have been stolen from the Museum of Kuwait. It was also marked "louvre" – in lower case – and bore several stamps from the Parisian museum.

The hawker, a former soldier, Maitham al-Issawi, 33, from Hilla, 59 miles south of the capital, had been asking $450,000 for his prize and pundits had suggested that the painting could be worth £5m if it was returned in good condition.

But that opening price now seems wildly optimistic. An official with the Louvre Museum told the Associated Press that the Louvre had never had a Picasso in its collection and, in any case, does not sell its works because they are government property.

The London-based Art Loss Registry said it had no record of any paintings missing from the Kuwait National Museum, and no record of this particular painting as missing at all.

Issawi told police he had inherited the painting from his father, who was part of the 1990 invasion force and had returned from Kuwait with it. Issawi Snr would not have been the only former soldier to have come home with loot. Tonnes of antiquities and other valuables were stolen by Saddam's forces from Kuwaiti official buildings and homes. They included gold jewellery, furniture and fittings, archaeological pieces and Islamic art.

Many of the items were stored in the palaces of Saddam, his two adult sons and their acolytes. One haul was recovered from one of the former dictator's homes in the Baghdad suburb of Mansour. Many more items are believed to have been scattered throughout Iraq after Baghdad fell.

A failure to round-up the treasure in the six years since Saddam's ousting has been a factor in continuing strain between the two states, which have yet to fully re-establish diplomatic ties cut in 1990.

An Iraqi spokesman, Ali al-Dabbagh, tonight defended the length of time taken to round up the stolen goods. "In 2003, every treasure in the Iraqi national museum and anything of value in Saddam's palaces was stolen, and it hasn't been returned, despite the efforts of successive governments.

"But in 2003, the government found some archives and artefacts that were stolen from Kuwait [in 1990]. There was an inventory and it was given to the Kuwaitis … It is at our initiative that the Picasso painting was found."

Akeel al-Mendlawi a director in Iraq's cultural ministry, said: "In 1990 there were two types of thievery from Kuwait, one officially sanctioned and then there was the stealing of private individuals. The goods stolen officially were kept in cultural centres or Saddam's palaces. And in 2003 they were stolen again."