WASHINGTON (Reuters) - The United States slapped new sanctions on Iran and accused its Revolutionary Guard of spreading weapons of mass destruction on Thursday but Russian President Vladimir Putin said such moves only forced Tehran into a corner over its nuclear program.
Also labelling Iran's Qods military force a supporter of terrorism, Washington imposed sanctions on more than 20 Iranian companies, banks and individuals as well as the defence ministry, hoping to increase pressure on Tehran to stop uranium enrichment and curb its "terrorist" activities.
"Today, Secretary Paulson and I are announcing several new steps to increase the costs to Iran of its irresponsible behaviour," said Secretary of State Condoleezza Rice, who made the announcement alongside Treasury Secretary Henry Paulson.
The moves were controversial at home as well as abroad.
Several Democratic presidential candidates, though not front-runner Hillary Clinton, said they were worried the White House had begun a march to war.
"I am deeply concerned that once again the president is opting for military action as a first resort," said Connecticut Senator Christopher Dodd, a long-shot Democratic candidate.
Clinton, a New York senator, issued a statement backing the sanctions.
It is the first time the United States has sought to take such punitive measures against another country's military. Russia and some other U.S. allies believe dialogue rather than more punishment or military action is the way forward.
"Why should we make the situation worse, corner it, threatening new sanctions?" Putin said in Lisbon.
"Running around like a mad man with a blade in one's hand is not the best way to solve such problems," he told a news conference with Portugal's president.
Iran responded angrily.
"The hostile policies of America against the respectful Iranian nation and our legal organizations are against international regulations and have no value," Foreign Ministry spokesman Mohammad Ali Hosseini was quoted as saying on the state broadcaster IRIB's Web site.
"Such policies have always failed."
Talk of U.S. military action against Iran has been more intense in recent months, particularly from some conservatives who would like to see President George W. Bush act against Tehran before he leaves office in January 2009.
The issue is also looming larger in the 2008 presidential campaign. Former Massachusetts Gov. Mitt Romney, a Republican candidate, said the military option must be on the table in the event sanctions do not work.
"We have a number of options from blockade to bombardment of some kind, and that's something we very much have to keep on the table," he said.
Defence Secretary Robert Gates characterized any U.S. military planning for a strike on Iran as "routine" to reporters on a flight en route to Washington.
The goal of the financial measures is to deter Europeans and others from investing in Iran. Among the banks affected are Bank Melli, Iran's largest bank, Bank Mellat and Bank Saderat.
Iran expert Karim Sadjadpour said the practical effect of the measures would be limited.
"It's not like the Qods force have been doing deals with (Wall Street firms) Goldman Sachs or JPMorgan and will be financially crippled by this label," said Sadjadpour from the Carnegie Endowment for International Peace.
The Revolutionary Guard Corps has about 125,000 members and is the most important wing of Iran's military. It also has sprawling financial concerns, which U.S. officials say it uses to buy nuclear technology.
Washington accuses the Qods force, the most elite unit of the Revolutionary Guards, of arming and training militants in Iraq who attack U.S. forces. The United States also says the Qods provide "material support" for Hezbollah in Lebanon, the Taliban in Afghanistan and Hamas in the Palestinian Territories.
Britain said it supported Washington's new sanctions and vowed to take the lead in pulling together a third round of U.N. sanctions.
Political directors from the five permanent members of the U.N. Security Council -- the United States, Russia, China, France and Britain -- and Germany are expected to meet in Europe next week to discuss a new resolution.
The West believes Iran is seeking to build an atomic bomb while Tehran says its nuclear program is for peaceful purposes.