The United States on Monday designated Iran’s Revolutionary Guard a “foreign terrorist organization” in a move to increase pressure on the country that could also have significant military, diplomatic and economic implications throughout the Middle East and beyond.

It is the first time that the U.S. has designated a part of another government as a terrorist organization. The designation could spark Iranian retaliation as well as open hundreds of foreign companies and business executives to U.S. travel bans and possible prosecution for sanctions violations. It may also affect the ability of American diplomats and military officers to engage with key Mideast actors, notably in Iraq and Lebanon.

“This unprecedented step, led by the Department of State, recognizes the reality that Iran is not only a state sponsor of terrorism, but that the IRGC actively participates in, finances and promotes terrorism as a tool of statecraft,” President Donald Trump said.

Secretary of State Mike Pompeo said the move is part of an effort to put “maximum pressure” on Iran to end its support for terrorist plots and militant activity that destabilizes the Middle East. Speaking to reporters, he rattled off a list of attacks dating to the 1980s for which the U.S. holds Iran and the IRGC responsible, beginning with the attacks on the Marine Corps barracks in Beirut, Lebanon in 1983.

“With this designation, the Trump administration is simply recognizing a basic reality,” Pompeo said.

The designation blocks any assets that IRGC entities may have in U.S. jurisdictions and bars Americans from any transactions with it. When it takes effect next week, it will allow the U.S. to deny entry to people found to have provided the Guard with “material support” or prosecute them for sanctions violations. That could include European and Asian companies and businesspeople who deal with the Guard’s many affiliates.

“It 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.”

Pompeo said the action should serve as a warning to corporate lawyers to ensure any business their companies do in Iran is not with any entity affiliated with the Guard. “If you’re the general counsel for a European financial institution today, there is more risk,” he said.

The IRGC is a paramilitary organization formed in the wake of Iran’s 1979 Islamic Revolution to defend the government. The force answers only to Iran’s supreme leader, operates independently of the regular military and has vast economic interests across the country. The U.S. estimates it may control or have a significant influence over up to 50% of the Iranian economy, including non-military sectors like banking and shipping.

Iran immediately responded with its Supreme National Security Council designating the U.S. Central Command, also known as CENTCOM, and all its forces as terrorist, and labeling the U.S. a “supporter of terrorism.”

The Council denounced the U.S. decision as “illegal and dangerous” and said the U.S. government would be responsible for all “dangerous repercussions” of its decision. It defended the IRGC, which has fought Islamic State fighters, as being a force against terrorism.

Reaction from those who favor tougher engagement with Iran was quick and welcoming.

“Thank you, my dear friend, US President Donald Trump,” Israeli Prime Minister Benjamin Netanyahu said in a tweet, a day before what could be a close election. “Thank you for answering another of my important requests that serves the interests of our countries and of countries in the region.”

Sen. Ted Cruz, R-Texas, called the action an “overdue” but essential step that should be followed by additional sanctions.

Rep. Michael McCaul of Texas, top Republican on the House Foreign Affairs Committee, said the designation “ends the facade that the IRGC is part of a normal military.”

However, critics of Trump’s hardline Iran policy denounced the decision as a prelude to conflict.

“This move closes yet another potential door for peacefully resolving tensions with Iran,” said Trita Parsi, the founder of the National Iranian American Council. “Once all doors are closed, and diplomacy is rendered impossible, war will essentially become inevitable.”

American military commanders were planning to warn U.S. troops remaining in Iraq, Syria and elsewhere in the region of the possibility of retaliation. Aside from Iraq, where some 5,200 American troops are stationed, and Syria, where some U.S. 2,000 troops remain, the U.S. 5th Fleet, which operates in the Persian Gulf from its base in Bahrain, and the Al Udeid Air Base in Qatar, are potentially at risk.

In addition to potential retaliation, the designation may also complicate U.S. diplomacy in the Middle East. No waivers or exceptions to the sanctions were announced, meaning U.S. troops and diplomats could be barred from contact with Iraqi or Lebanese authorities who interact with Guard officials or surrogates.

The Pentagon and U.S. intelligence agencies had also raised concerns about the impact of the designation if the move did not allow contact with other foreign officials who may have met with or communicated with Guard personnel. Those concerns have in part dissuaded previous administrations from taking the step, which has been considered for more than a decade.

The U.S. special envoy for Iran, Brian Hook, and the State Department’s counterterrorism coordinator, Nathan Sales, said the decision was reached after consultation with agencies throughout the government but would not say in a news conference if the military or intelligence concerns had been addressed.

“Doing this will not impede our diplomacy,” Hook said, without elaborating.

The State Department currently designates more than 60 organizations, including as al-Qaida and the Islamic State, Hezbollah and numerous militant Palestinian factions, as “foreign terrorist organizations.” But none of them is a state-run military.