"America says Iran getting a nuclear weapon could cause WW3 but I think it's more likely that America would cause WW3 by invading Iran"
Jack, Bangor, UK
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The US maintains that it wants to pressure Iran into ending its nuclear programme, suggesting that it could be used for warfare and not merely for producing electricity.
The US state and treasury departments also designated the Revolutionary Guard Corps a "proliferator of weapons of mass destruction" and its elite Quds Force as a "supporter of terrorism".
The sanctions will cut off more than 20 Iranian entities, including individuals and companies owned or controlled by the Revolutionary Guards from the American financial system and is likely to effect the international banking community.
The sanctions cover three Iran state-owned banks, including Bank Melli.
Rice said: "These actions will help to protect the international financial system from the illicit activities of the Iranian government.
"They will provide a powerful deterrent to every international bank and company that thinks of doing business with the Iranian government."
However, some analysts argue that such measures are more likely to paint Iran into a corner.
Mehran Kamrava, a political analyst, said: "It is likely to actually be counter-productive, particularly at a time when Iran continues its negotiations with the European Union and with the IAEA.
"I think it is an action designed more for public consumption back in the United States."
In Mafra, Portugal, to attend a summit with EU leaders, Vladimir Putin, the Russian president, likened supporters of tough policies on Iran to "mad people wielding razor blades".
The US has long labelled Iran a "state supporter of terrorism", and has been working for years to gain support for tougher sanctions from the world's most powerful countries.
The UK said it backed the latest sanctions, promising to take the lead in pulling together a third round of UN Security Council sanctions.
The sanctions are believed to be the first of their type taken by the US against the armed forces of another government, and are the broadest set of punitive measures against Iran since 1979.
They could affect any number of foreign companies, forcing them to stop doing business with the Revolutionary Guards.
Mohammad Ali Hosseini, Iran's foreign ministry spokesman, said: "Such a decision by a state that both manufactures and develops weapons of mass destruction and supports terrorist groups will not disturb the development and progress of Iran and its legitimate institutions.
"The ridiculous accusations by American officials cannot save them from the Iraqi crisis that they have themselves created."
Hosseini also described the unilateral US sanctions as being contrary to international law.
"The hostile American policies towards the respectable people of Iran and the country's legal institutions are contrary to international law, without value and, as in the past, doomed to failure."
Ali Reza Ronaghi, Al Jazeera's correspondent in Tehran, said the sanctions are likely to make life more difficult for Iranians.
Estimated to number between 125,000 and 350,000 outside regular Iranian military's chain of command
Has own navy, air force and special forces
Wields strong influence over Iranian political life and widely involved in country's economy
Mahmoud Ahmadinejad, the Iranian president, rose through ranks of Guard and won presidency with support of its veterans' network.
He said: "These banks that are being designated are major banks that pay the monthly wages of Iranian workers, Iranian government people, and it's not easy for Iranians to do any business with any foreign country from now on."
The Revolutionary Guards, formed to safeguard Iran's 1979 Islamic revolution, has pushed well beyond its military roots, and now runs car factories, construction firms and operates newspapers and oilfields.
Ronaghi said: "They are making pipelines, dams, roads and tunnels - wherever they are needed.
"They have many financial partners in foreign countries and if they are deprived from doing business with them, it's going to be a problem for the Iranian government to continue construction of the country."
A senior Iranian member of parliament said the sanctions were a "strategic mistake" that would increase distrust between the two countries.
Kazem Jalali, a spokesman for parliament's foreign affairs and security commission, said: "The Revolutionary Guards is an official force in Iran and it is clear that labelling them terrorists is interfering in the domestic affairs of a sovereign nation."
History of sanctions
Relations between the US and Iran have remained tense since the Islamic republic was established.
In 1979, when Iranian students seized the US embassy in Tehran, taking 63 Americans hostage, Jimmy Carter, then US president, severed diplomatic ties and imposed the first sanctions against Iran. He blocked all Iranian property and interests in the US.
In 1987, Ronald Reagan, then US president, imposed a new import embargo on Iranian goods and services for what he called Iran's "support for international terrorism".
Bill Clinton prohibited US involvement in petroleum development in Iran during his presidency in 1995 for what he said was Iran's sponsorship of terrorism and active pursuit of weapons of mass destruction.