It is the first time the United States has formally labeled another country's military a terrorist group.
"The IRGC is the Iranian government’s primary means of directing and implementing its global terrorist campaign," Trump said in a statement.
The designation "makes crystal clear the risks of conducting business with, or providing support to, the IRGC," Trump said. "If you are doing business with the IRGC, you will be bankrolling terrorism."
Critics have warned that the move could open U.S. military and intelligence officials to similar actions by unfriendly governments. The United States has already blacklisted dozens of entities and people for affiliations with the IRGC, but not the organization as a whole.
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Secretary of State Mike Pompeo, a strident critic of Iran, has pushed for the change in U.S. policy as part of the Trump administration's tough posture toward Tehran. Pompeo told a news conference the designation will take effect in one week.
The announcement comes shortly before the first anniversary of Trump's decision to pull out of a 2015 nuclear deal with Tehran and to reimpose sanctions that had crippled Iran's economy.
After reports of the designation emerged late on Friday, Iran warned it will take reciprocal action.
"We will answer any action taken against this force with a reciprocal action," a statement issued by 255 out of the 290 Iranian lawmakers said, according to IRNA.
The Israeli Foreign Ministry applauded the move, saying that the announcement set a precedent. "This meaningful development is anoter level in the policy of maximum pressure on Iran led by the U.S.A. and her partner Israel," they said in a press release. "This announcement is a reult of the Iranian policy of terror that sows ruin in the Middle East and throughout the world, from Syria and Lebanon to Argentina and Buenos Aires." The ministry also thanked the Trump administration for taking this step.
In a statement, the World Jewish Congress commended Trump's decision. "We urge the international community to follow the US’ lead and treat Iran’s Revolutionary Guard exactly for what it is, a terrorist militia that thrives on repression and blood,” said WJC President Ronald S. Lauder
Set up after the 1979 Islamic Revolution to protect the Shi'ite clerical ruling system, the IRGC is Iran's most powerful security organization. It has control over large sectors of the Iranian economy and has a huge influence in its political system.
The IRGC is in charge of Iran's ballistic missiles and nuclear programs. Tehran has warned that it has missiles with a range of up to 2,000 km (1,242 miles), putting Israel and U.S. military bases in the region within reach.
The United States has already blacklisted dozens of entities and people for affiliations with the IRGC, but the organization as a whole is not.
In 2007, the U.S. Treasury designated the IRGC's Quds Force, its unit in charge of operations abroad, "for its support of terrorism," and has described it as Iran's "primary arm for executing its policy of supporting terrorist and insurgent groups."
Iran's state-run TV said on Monday that Washington's decision to designate Iran's Islamic Revolutionary Guard Corps a foreign terrorist organization contradicted international law and was illegal.
"No other country has the legal right to designate as terrorist another country's armed forces ... Iran's influence in the Middle East and its success in fighting against Islamic State are reasons behind this designation," state TV said, without quoting a specific official.