The US administration's announcement that it is preparing to "declare Iran's Revolutionary Guard Corps as a foreign terrorist organization" (Per New York Times) is in essence a indirect declaration of war against the Iranian government. This decision is bound to give the influential neo-conservatives in the administration ammunition to encourage military aggression against Iran.
The bottom line is that the US has not been successful in gathering the international community's support against Iran to halt its nuclear program; they have shifted gears to label it a terrorist state and justify any actions against Iran. By labeling a faction within a government as a 'terrorist organization,' the US is technically placing the government in the same category, and, therefore preparing their public and the international stage for a serious confrontation with Iran.
Sources who shared this announcement with the Washington Post and New York Times have asked to remain anonymous; they realize the provocative nature of their message. Other than providing carte blanche for military action, it not only annuls negotiations with Iranians over Iraq"s security, but also undermines Iranian moderates who favor discussions with the international community.
This decision although designed to apply financial pressure on the Islamic Republic to halt its nuclear program, is unlikely to have any such effect. This organization has been traditionally accused of involvement in terrorist activities and has hence prepared itself for any such charges; they have kept themselves independent of financial ties to any western entity in light of potential sanctions. Therefore, financially they are quite protected.
The Revolutionary Guard is a vast organization that operates on many levels in Iran from the military to cultural organizations; it has a covert and complex network of financial investments, making it virtually impossible to trace. Many of Iran's ruling elite such as Members of Parliament, ambassadors and government officials, are former members of the Revolutionary Guard. The only real effect of such an announcement is that this group will have great difficulty in traveling, investing, educating their children, or engaging in economic transactions in western countries.
The major blow will come to the Iranian society; the government will place the country on 'war alert', making security its first priority and using it to apply even more pressure on civil society, democratic movements and media. At a time when Ahmadinejad's government is facing domestic and international crisis, such a move will be a god sent for them -- an excuse to exonerate them from keeping all their promises they made to the Iranian people prior to election.
Needless to say, labeling a part of Iran's army 'terrorist organization', will translate to even greater instability in the Middle East.