A senior US official said in total Washington had slapped sanctions on more than 20 Iranian companies, banks and individuals as well as
"This is a very substantial measure taken by the administration today. We have decided to take this measure as we believe that Iran is continuing its proliferation and its terrorism activities," a senior Bush administration official said in a conference call.
US considering new measures for months
The United States accuses the elite Quds force of arming and training militants in Iraq who in turn attack US Forces. Tehran charges that Washington has destabilized Iraq.
The Bush administration had been considering the new measures for months but there had been bureaucratic infighting over when and how far to go with the sanctions.
It is the first time the United States has sought to take such punitive measures against another country's military and opposed by allies like Russia who believe dialogue rather than more punishment or military action is the way forward.
"We are taking this action now because we believe we are at a time when if diplomacy is going to succeed it needs to be stronger. There needs to be greater pressure on the Iranian government," said the senior US official, who spoke on condition of anonymity.
The United States is also pushing for a third UN Security Council sanctions resolution against Tehran over its nuclear program but veto-wielding China and Russia oppose such a move. The West believes Iran is seeking to build an atomic bomb while Tehran says its nuclear program is for peaceful power purposes.