April 22, 2019

The US designation of the Islamic Revolutionary Guard Corps (IRGC) – a force of 125,000 that encompasses land, air, and naval units – as a foreign terrorist organization (FTO) April 15 is highly unlikely to alter Iran's behavior in Middle Eastern countries where Iran is heavily involved. The move by the US government is also likely to prompt Tehran to engage in retaliatory acts against US interests in the region. While Tehran will be extremely hesitant to escalate tensions with the US and its allies to the point of direct war, it will continue to pursue policies that it believes will ensure the regime's survival. Furthermore, Tehran will almost certainly continue its involvement in countries – Syria, Iraq, Lebanon, and to a degree, Yemen – where it has invested billions of dollars to expand its regional influence. It is also highly likely that Tehran will increase its cyber operations and engage in cyberespionage activities and attacks against the US and its allies' companies and government institutions.

Tehran retaliated to the US designation by branding the United States Central Command (CENTCOM) – primarily responsible for the readiness and deployment of troops in the Middle East – a terrorist entity and naming the US government as a sponsor of terror in the region.


New Sanctions Imposed on IRGC-Affiliated Organizations

While the US government has regularly targeted IRGC-linked individuals and companies with sanctions, this is the first time that it has ever labeled an active branch of a foreign government as an FTO. On March 26, the US Treasury Department imposed sanctions on a network of 25 Iranian nationals and companies supposedly supporting the IRGC. On March 22, the US Department of State implemented similar measures, imposing sanctions on 14 Iranian nationals and 17 organizations associated with Organization of Defensive Innovation and Research (SPND, the Iranian research institute primarily tasked with researching nuclear weapons and ballistic missiles. The US government's new sanctions come against the backdrop of Supreme Leader Ayatollah Ali Khamenei's Nowruz speech on March 21 in which he revealed that Iran was determined to bolster its defense capabilities.


Rising Tensions Between the US and Iran

The move to directly target the IRGC by designating it an FTO is likely to escalate tensions between Washington, DC and Tehran. While the US government's stated goal in imposing a growing number of sanctions on Iranian defense agencies and financial institutions is to force Tehran to abandon its regional engagements and ballistic missile program, it is highly unlikely that those objectives will be realized. Tehran has invested billions of dollars in proxy networks in Syria, Iraq, Lebanon, and to some extent, Yemen. The IRGC, which has been primarily responsible for the implementation of the country's foreign policy in the region, will likely continue its regional engagements. Tehran’s strategy is to deter direct attacks by the US and regional adversaries – Israel and Saudi Arabia – by the threat of retaliation through IRGC proxies. In the absence of a strong air force, Tehran sees ballistic missiles as a necessary deterrent against any possible attacks.


The IRGC and the Iranian Public  

The US government's move is likely to rally Iranians – even those who have regularly opposed the government's policies – behind the IRGC. Since January 2017, anti-government demonstrations and rallies have become an almost daily reality in Iran, with demonstrators regularly protesting the government's alleged mismanagement of the economy and its military adventurism in the region. However, following the recent IRGC FTO designation, thousands of Iranians took to the streets to show their support for the corps, and Iranian Members of Parliament wore IRGC uniforms to demonstrate their solidarity. Part of the reason for this widespread support is due to the number of ordinary Iranians who have been involved in the IRGC, whether voluntarily or via conscription. Some 11 million Iranians have served within the IRGC in some capacity since it was founded in 1979.

The IRGC is heavily involved in the Iranian economy, particularly in the fields of energy, construction, finance, shipping, defense, and communications. Some estimates suggest that the IRGC controls over 20 percent of the economy. As the sanctions begin to impact the IRGC's business interests, the group is likely to use its proxies in the region to retaliate and will not hesitate to encourage its proxy groups to conduct attacks against US troops in the region.


Tehran's Growing Cyber Capabilities and Threats 

Iran is quickly becoming one of the most sophisticated cyber powers in the world. Iranian-backed cyberassailants have conducted numerous cyberattacks against the US and its allies' defense agencies and companies. The IRGC will likely increase the use of its cyber units to target the US and its allies' financial and security institutions. Since 2008, the IRGC has significantly invested in its cyber capabilities, and in 2009, it founded the Cyber Council of the Basij, also known as the Mobilization Resistance Force. The Basij cyberunits will likely attempt to steal large amounts of data and engage in espionage activities against companies and government institutions.

US government and other foreign governments' officials have stated that Iran has "laid the groundwork" for conducting widespread cyberattacks against the US and European infrastructure. Iran reportedly has the capability to launch denial-of-service attacks against numerous electrical grids, water plants, and private corporations across the US, Europe, and the Middle East. Iran is also suspected of carrying out several cyberattacks against Saudi companies and government agencies in recent years. In 2017, Iran allegedly launched a cyberattack on an Aramco oil refinery in Saudi Arabia, which prompted widespread disruptions and caused an explosion, halting the company's operations for several hours.


Risk Management Strategy for Foreign Corporations

The US and its allies will almost certainly continue applying pressure in an attempt to force Iran to alter its behavior in the region and formulate domestic policies that are in line with international norms. However, Tehran will likely continue its foreign engagements and pursue defense policies that it believes will ensure the regime’s survival and deter its adversaries from taking military actions against it. While Iran will be hesitant to escalate tensions to the point of direct war with the US and its allies, it will remain determined to keep the status quo in Iran and defend the Islamic Revolution at any cost.

Washington, DC's designation of the IRGC as an FTO will be of paramount consequences to multinational organizations operating throughout the Middle East, particularly in countries where Iran has significant commercial interests. Foreign corporations should exercise extreme caution and vet commercial entities operating in Iraq, Afghanistan, Syria, Lebanon, and Yemen to ensure they do not maintain any business ties with the IRGC. The US government will almost certainly sanction any commercial entity that lends material support in any form to the IRGC or IRGC-linked companies. Foreign corporations must also institute measures that will shield them from Tehran's growing cyberthreats. The IRGC and its cyber proxy networks will likely continue their cyberattacks, particularly against companies and organizations that are linked to the US defense and intelligence agencies. 

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