The United States has begun seizing $1.4 billion in Iraqi financial assets.
It is only the second time since World War II that the United States has taken ownership of a substantial amount of frozen foreign assets.
Some of the assets, which the US government said would be used to help rebuild Iraq after the war have been frozen for more than a decade since the first Gulf War.
The action was also the first time the United States has used the authority to seize foreign assets under a 2001 federal anti-terror law.
US Treasury Secretary Mr John Snow said tonight that President George W. Bush had issued an executive order to confiscate the assets, which will be gathered from almost 20 US banks and placed into an account at the Federal Reserve Bank of New York.
Along with $600 million that has been frozen overseas, the US could raise about $2 billion for Iraq's post-war reconstruction through the move, according to a Treasury official.
Another $302 million in seized assets will be set aside to pay for court claims made by what the Treasury called victims of the Iraqi regime.
Mr Snow said the United States was urging other countries to freeze all assets of Saddam and his ruling Iraqi regime. He also warned that banks or countries could face tough penalties if they did not co-operate with US efforts.