* Kuwait banned since 2015
* Athletes would compete under Olympic flag (Updates with more details)
By Karolos Grohmann
LAUSANNE, Switzerland, June 2 (Reuters) - Kuwait's chances of competing at the Rio Games were dealt a severe blow on Thursday with the International Olympic Committee (IOC) saying a ban imposed last year was unlikely to be lifted in time.
Kuwait's athletes would not, however, be banned from the Games starting on Aug. 5 but would compete as independent athletes under the Olympic flag, IOC spokesman Mark Adams said.
Kuwait and the IOC have been at loggerheads over a new sports law that the Olympic body says will undermine the autonomy of sport in the country. Kuwait argues it will strengthen the independence of sports bodies.
"The situation with Kuwait is not improving," Adams told reporters. "Since the last IOC executive board there has been no positive development due to the attitude of the government."
"It is unlikely to be resolved by the time of the Games in Rio. We believe Kuwait will remain suspended," he said.
The ban, which was imposed in October, means the country's Olympic Committee and consequently its athletes are not eligible for any funding from the IOC for the duration of the suspension and cannot take part in any IOC-linked event.
The IOC redistributes the majority of revenues from the Games to its stakeholders, including the National Olympic Committees.
Athletes and coaches also regularly benefit from Olympic scholarships, for which Kuwaitis are now also not eligible.
Kuwait, angered by the IOC decision last year, has filed a civil lawsuit against the country's Olympic committee and is also trying to get the Olympic Council of Asia, headquartered there, to leave the country.
Efforts to find a solution with the IOC in March collapsed with each side blaming the other for failure to agree on a deal.
"We would love for them to come back to the (negotiating)table," Adams said. "It (the ban) is pre-emptive. Hopefully it will not be necessary but with two months left it is very likely."
Kuwait was also suspended in 2010 over a similar dispute but was reinstated before the 2012 London Olympics.
The country's football federation has also been suspended by world soccer's governing body FIFA over government interference. (Reporting by Karolos Grohmann; editing by Ken Ferris)