Dubowitz and Takeyh argue that Trump should “significantly [expand] the number of IRGC entities and individuals subject to sanctions from the current 60 to include the thousands of front companies operated by the guards.” They do not mention that, under OFAC’s so-called 50 percent rule, any entity of which a designated person or group (such as the IRGC) has majority ownership is already subject to U.S. sanctions. It is true that OFAC does not impose sanctions on entities in which the IRGC has less than a majority stake—but OFAC has also stated that such entities “may be the subject of future designation or enforcement action by OFAC.” This warning has deterred foreign firms from dealing with the kinds of front companies to which Dubowitz and Takeyh refer.
If the benefits of designating the IRGC a terrorist group are hazy, the costs are obvious. Doing so would undermine the nuclear deal by dramatically escalating tensions with Iran. It would also derail the tacit cooperation between Washington and Tehran in the fight against the Islamic State, or ISIS, in Iraq, since the IRGC and the Shiite militias it backs would likely respond by trying to frustrate the United States’ efforts in the country. As U.S. military officials have argued, that could endanger the lives of U.S. troops. More broadly, it is not clear that additional sanctions could force Iran to meaningfully change its behavior without sacrificing other U.S. interests and putting the two countries on a path to conflict.