U.S. imposes new sanctions on Iran's military

By Sue Pleming

WASHINGTON (Reuters) - The United States on Thursday dubbed Iran's Revolutionary Guard Corps a proliferater of weapons of mass destruction and imposed sanctions on its Qods force, ratcheting up pressure on Tehran to abandon its nuclear program.

In total, Washington imposed sanctions on more than 20 Iranian companies, major banks and individuals as well as the defense ministry in a bid to force Tehran to stop uranium enrichment and curb its "terrorist" activities.

"Today, Secretary Paulson and I are announcing several new steps to increase the costs to Iran of its irresponsible behavior," said Secretary of State Condoleezza Rice, who made the announcement alongside Treasury Secretary Henry Paulson.

It is the first time the United States sought to take such punitive measures against another country's military and is opposed by allies like Russia who believe dialogue rather than more punishment or military action is the way forward.

"Why should we make the situation worse, corner it, threatening new sanctions?" Russian President Vladimir Putin told reporters during a visit to Lisbon.

Talk of U.S. military action against Iran has been more intense in recent months, particularly from some conservatives who would like to see U.S. President George W. Bush act against Iran before he leaves office in January 2009.

But Rice said the United States was committed to a diplomatic solution and urged Tehran to accept an offer made by major powers last year to give up sensitive nuclear work in exchange for incentives, including talks with Washington.

"We will be open to the discussion of any issue. But if Iran's rulers choose to continue down a path of confrontation, the United States will act with the international community to resist these threats," Rice said.

Under Secretary of State Nicholas Burns, tried to soothe European and other fears that military action was near.

"We do not believe that conflict is inevitable. It is certainly not desirable. We want to have a peaceful resolution of this problem," said Burns.

"NOT WORTH THE RISK"

The goal of the financial measures is to deter Europeans and others from investing in Iran. Among the Iranian banks affected are Bank Melli, Iran's largest bank, Bank Mellat and Bank Saderat.

"Doing business with the Iranian regime is not worth the risk," said a senior U.S. official.

But Iran expert Karim Sadjadpour said the practical effect of the measures would be limited.

"It's not like the Qods force have been doing deals with (Wall Street firms) Goldman Sachs or JPMorgan and will be financially crippled by this label," said Sadjadpour from the Carnegie Endowment for International Peace.