The Bush administration imposed sweeping new sanctions against Iran Thursday — the harshest in nearly three decades — cutting off key Iranian military and banking institutions from the American financial system for Tehran's alleged support for terrorism and nuclear weapons ambitions.
In the broadest U.S. unilateral penalties on Iran since the takeover of the U.S. Embassy in 1979, the administration slapped sanctions on Iran's Revolutionary Guard Corps, a main unit of its defense ministry, three of its largest banks and eight people that it said are engaged in missile trade and back extremist groups throughout the Middle East.
Secretary of State Condoleezza Rice and Treasury Secretary Henry Paulson said the moves would further isolate the Islamic republic's government by further distancing it from the international economy and discouraging its trading partners from continuing to do business with it.
At the same time, they stressed that offers for negotiations with Iran over its nuclear program remain on the table and that the sacnctions are not a sign of imminent military action. The U.S. officials insist — over Iranian denials — that the nuclear program is a cover for atomic weapons development.
"Unfortunately, the Iranian government continues to spurn our offer of open negotiations, instead threatening peace and security," through its nuclear program, production and export of ballistic missiles and backing for Shia insurgents in Iraq, the Taliban in Afghanistan, Hezbollah in Lebanon and Hamas in Gaza, Rice said.
The United States has long labeled Iran a state supporter of terrorism and has been working for years to gain support for tougher sanctions from the international community aimed at keeping the country from developing nuclear weapons. It has won two U.N. Security Council sanctions resolutions but a third has been held up by Chinese and Russian opposition.
Rice, who also noted Iran's hardline anti-Israel stance, said the moves were part of "a comprehensive policy to confront the threatening behavior of the Iranians" but that Washington remains committed to "a diplomatic solution."
Other officials echoed that sentiment, maintaining the announcement is not a prelude to armed conflict with Iran despite concerns from some allies that the administration is building a case for war.
"In no way, shape of form does it anticipate the use of force," said Nicholas Burns, the State Department's No. 3 diplomat.
Instead, officials said they hope the measures will increase pressure on Iran to take a deal offered last year that would give the oil-rich country economic and other incentives in exchange for dropping nuclear activities that could produce a bomb.
In Tehran, the Guards' chief, General Mohammad Ali Jafari, shrugged off increased U.S. pressure on the force.
"Today, enemy has concentrated sharp point of its attacks on the Guards," Jafari told a military ceremony in Mashhad, east of Tehran, according to the state news agency IRNA. "They have applied all their efforts to reduce the efficiency of this revolutionary body. Now as always, the corps is ready to defend the ideals of the revolution more than ever before."
Israel, on the other hand, said it was pleased with the sanctions.
"Israel welcomes the U.S. government's decision," Foreign Ministry spokesman Mark Regev said in Jerusalem. "We see this as an important contribution to the international effort to intensify pressure on Iran to abandon its nuclear program."
Iran has ignored previous, smaller attempts to apply international and financial sanctions, and says the conditions Washington has set for talks are unacceptable. Iran is continuing work on its nuclear program, which it says is peaceful.
The sanctions target 25 Iranian entities, including individuals and companies owned or controlled by the Revolutionary Guard that play a major role in Iran's domestic economy and international trade. The are the first of their type taken by the United States specifically against the armed forces of another government.
In addition to freezing any assets they may have in U.S. jurisdictions, something officials acknowledged would be of minimal effect, the sanctions also bar Americans from doing business with them.
But of far greater impact, officials said, they will subject foreign firms to U.S. sanctions if they engage with the designated entities.
Paulson called on "responsible banks and companies around the world" to end relationships with the three banks and companies and affiliates of the IRGC and noted that because of the IRGC's reach into business and other spheres, "it is increasingly likely that if you are doing business with Iran you are doing business with the IRGC."
State-owned banks Bank Melli, Bank Mellat and Bank Saderat were named supporters of global terrorist groups for their activities in Afghanistan, Iraq and the Middle East. Along with Bank Sepah, which was already under U.S. and U.N. sanctions, the institutions account for more than 50 percent of Iran's banking sector, Treasury officials said.
"As awareness of Iran's deceptive behavior has grown, many banks around the world have decided as a matter of prudence and integrity that Iran's business is simply not worth the risk," Paulson said. "It is plain and simple: Reputable institutions do not want to be the bankers for this dangerous regime."
The Revolutionary Guard Corps and its Ministry of Defense and Armed Forces Logistics were designated proliferators of ballistic missile technology. The Corps, also known as the IRCG, is the largest component of Iran's military. The defense ministry entity is the parent organization for Iran's aerospace and ballistic missile operations.
The Quds Force, a part of the Guard Corps that Washington accuses of providing weapons, including powerful bombs blamed for the deaths of U.S. soldiers in Iraq, was named a supporter of designated terrorist organizations.
The Revolutionary Guards organization, formed to safeguard Iran's 1979 Islamic revolution, has pushed well beyond its military roots, and now owns car factories and construction firms and operates newspaper groups and oil fields.
Current and former members now hold a growing role across the country's government and economy, sometimes openly and other times in shadows.
The guards have gained a particularly big role in the country's oil and gas industry in recent years, as the national oil company has signed several contracts with a guards-operated construction company. Some have been announced publicly, including a $2 billion deal in 2006 to develop part of the important Pars gas field.
Now numbering about 125,000 members, they report directly to the supreme leader and officially handle internal security. The small Quds Force wing is thought to operate overseas, having helped to create the militant Hezbollah group in 1982 in Lebanon and to arm Bosnian Muslims during the Balkan wars.