IRGC and Terrorism-Related Sanctions Why They Fail, What They Achieve

Key Findings:

In June 2022, discussions among the five permanent members of the UN Security Council, Germany, and Iran aimed at revitalizing the Joint Comprehensive Plan of Action (JCPOA) concluded without resolution. A critical obstacle in these negotiations was the disagreement between the United States and Iran regarding the U.S. designation of the Islamic Revolutionary Guards Corps (IRGC) as a foreign terrorist organization in 2019. Following this designation, similar motions have emerged in the United Kingdom and several EU countries, with Canada also classifying the IRGC as a terrorist entity. The dynamics shifted further after Iran launched a missile attack on Israel in April 2024 in retaliation for an Israeli strike on its embassy in Damascus, intensifying calls, particularly from Israel, for the IRGC to be designated as a terrorist organization.

Despite the U.S. designation and accompanying sanctions against the IRGC, these measures have not significantly curtailed the IRGC’s extraterritorial operations or its capacity to inflict harm on Western allied forces in the Middle East. Conversely, the IRGC has been implicated in a recent escalation of activities by Iranian proxies across the “axis of resistance,” including the Hamas assault on Israel on October 7, 2023, the Houthi attacks on vessels in the Red Sea, renewed conflicts involving Hezbollah in Southern Lebanon, and Iran’s drone sales to Russia. This raises questions regarding the efficacy of sanctions against the IRGC and their potential impact on both the IRGC and Iran as a whole.

The analysis indicates that the IRGC’s terrorist designation is more complex than it initially appears. The Brief posits that terrorism-related sanctions have failed to limit the IRGC's extraterritorial engagements and suggests that further unilateral terrorist designations are unlikely to alter Iran's or the IRGC's support for allied forces in the region. The primary reason for this ineffectiveness is attributed to the opaque and informal nature of the IRGC’s extraterritorial activities.

While sanctions have adversely affected the IRGC's domestic civilian business operations, resulting in broader economic challenges for Iran, such hardship may motivate Iran to negotiate more seriously regarding its nuclear program. However, the IRGC's backing of regional proxies persists.

To substantiate this argument, the Brief will first explore the IRGC's transformation from a revolutionary militia to a significant political and economic player in Iran. It will then review the history of sanctions imposed on Iran and the IRGC, illustrating how the IRGC has adapted its operations to evade these sanctions. Finally, the Brief will examine the indirect consequences of sanctions on the IRGC's domestic business activities and the Iranian economy. Although sanctions have intensified economic pressures on Iran, they have not compelled the IRGC or the Iranian government to modify their regional or domestic strategies, raising questions about the effectiveness of a sanctions regime focused on the IRGC. Given the increasing pressure on various entities to designate the IRGC as a terrorist organization, a nuanced understanding of the implications of such actions is essential.

The Emerging Role of the IRGC

Over the past fifty years, the IRGC has transitioned from a revolutionary militia to a dominant political, economic, and military-security entity within Iran and the broader Middle East. As a military organization reporting solely to the Supreme Leader, the IRGC operates independently of the elected Iranian government, giving it considerable autonomy. Originally established as a transitional militia after the 1979 Iranian Revolution, the IRGC grew in power during the Iran-Iraq War (1980–1988), surpassing the regular army in status.

Since the early 1990s, the IRGC has expanded its scope of operations to include infrastructure development and various profit-driven ventures, enhancing its influence over Iran’s political landscape. Leveraging resources and expertise gained during the Iran-Iraq War, the IRGC has become the primary contractor for state-sponsored projects, establishing corporations that monopolize Iran’s economic sectors and fund extraterritorial activities.

The IRGC also engages in conflicts beyond Iran, with its Quds Force involved in training and supporting local militias in countries such as Iraq, Syria, Lebanon, and Yemen, and participating in asymmetric warfare. Its operations often reflect the interests defined by hardliners in Iran and the Supreme Leader's office, frequently overlapping with activities characterized as terrorism by the United States and other international actors.

Iran and the IRGC under Sanctions

Since the Iranian Revolution in 1979, Iran has faced various sanctions from the U.S., EU, and UN, targeting its nuclear ambitions, ballistic missile development, and support for terrorism. The U.S. first designated Iran as a state sponsor of terrorism in 1984. Sanctions have intensified over time, with the Iran Sanctions Act of 1996 focusing on Iran's nuclear and terrorism-related activities. The 2015 JCPOA temporarily alleviated some sanctions but became ineffective after the U.S. withdrew from the agreement in May 2018, leading Iran to deepen ties with China and Russia.

Analysts have noted that the terrorist designation may be redundant, as the IRGC has continued its operations without meaningful change in conduct since its designation. Analysts suggest that sanctions may inadvertently benefit the IRGC by facilitating corruption and allowing it to replace foreign investments with domestic operations, thereby strengthening its economic position. 

The IRGC has retained its reliance on direct action despite undergoing bureaucratic expansion over time. Its operational adaptability was particularly evident during the Iran-Iraq War, where the IRGC's unconventional methods filled gaps left by the conventional military, leading to the institutionalization of these tactics. It has also successfully circumvented many restrictions through informal trade routes, particularly with countries like China and Russia.