Dollars, not dinars, are being hunted by the US

The threat came as Treasury Secretary John Snow launched what he called a "worldwide hunt for blood money".

"The United States calls today upon the world to identify and freeze all assets of Saddam Hussein, the Iraqi regime, and their agents pursuant to established international obligations," Mr Snow said in a statement.

Treasury officials said they planned to use the seized Iraqi cash "for the benefit and welfare of the Iraqi people".

Although $302m will be held back to pay legal claims on the Iraqi government levelled by US citizens.

Russian opposition

Since 1990, when UN sanctions were imposed under Security Council Resolution 661, the US has frozen $1.74bn in Iraqi assets.

Another $600m is being held in bank accounts outside the US.

About two thirds of that is in the UK and the rest in 11 other countries including the Bahamas, the Cayman Islands, Japan, Saudi Arabia and Lebanon.

There has not been a single fact discovered linking Saddam Hussein's accounts in Russia to money laundering or the financing of terrorism Alexei Kudrin Russian finance minister

The US Treasury plan to hunt down Iraq's assets has already run into one roadblock.

The Russian government - still fuming over the US decision to sideline the UN Security Council and go to war - has announced it would not play ball.

Russia knew all about Iraqi bank accounts within its borders, Finance Minister Alexei Kudrin told the Interfax news agency, implying that Saddam Hussein or close associates have liquid assets there.

But without evidence, its hands are legally tied, he said.

"As far as I am aware, there has not been a single fact discovered linking Saddam Hussein's accounts in Russia to money laundering or the financing of terrorism," he insisted.

Others were less immediately negative.

Beyond the borders

The Netherlands, also a repository for frozen Iraqi funds, is going to examine whether it is legally possible to follow the US lead - although Jeroen Sprenger, head of communications for the Dutch Finance Ministry, did not hold out much hope.

"We were a little surprised" to hear about the US plan, he told BBC News Online when asked whether the Netherlands was prepared to put the frozen assets towards reconstruction.

"That's a little bit difficult - in fact it's not immediately possible, legally, to simply seize somebody's money and give it to somebody else."

But in confirming the government's preparedness to look into the matter, he also confirmed that one motivation was concern at the exceptionally long arm of the US government.

The powers that allow the US to seize the assets also allow it, in theory, to slap restrictions on the ability to do business in the US for those who refuse to play ball.

This extra-territorial reach is enshrined in the USA Patriot Act, passed in the immediate aftermath of the September 11 attacks, and gives the White House enormous latitude in dealing with the financial side of alleged terrorism.

It expands the duties of any financial institution doing business in, or with, the US to report transactions or assets belonging to people or groups the US accuses of terrorist activities.

The powers have yet to be tested in practice, however, and lawyers and bankers are still debating just how far this extra-territorial reach really goes.

US banks

The US's list of people whose funds should be frozen is much longer than that held by the UN.

And many other countries have refused to add names to their own list solely on America's say-so on the same grounds as the Russians' latest refusal.

The US banks allegedly holding Iraqi funds are Morgan Chase, Bank of New York, UBS, Citigroup, FRBNY, Gulf International Bank, Banca Nazionale del Lavoro, Bank of America, Wachovia, Arab Banking Corp, National Bank of Egypt, Societe Generale, Bank One, Deutsche Bank, HSBC, Commercial Bank of Kuwaite and American Express Bank.

The funds from the accounts, held in bank accounts under the names of the Government of Iraq, the Central Bank of Iraq, Rafidain Bank, Rasheed Bank and the State Organization for Marketing Oil, will be put in a US Federal account.