The Bush administration’s decision Thursday to put new sanctions on Iran’s Revolutionary Guards and its elite Quds force is a calculated gamble intended to convince Iran’s leadership to behave better in Iraq and suspend uranium enrichment.

But the step could backfire by arousing a nationalist backlash in Iran and convincing the leadership there that the U.S. government is not interested in negotiations—only in squeezing the Iranian economy until its people rise up and overthrow the regime.

Unfortunately, the chances of regime change remain minimal while oil approaches $100 a barrel. Meanwhile, U.S. actions could eliminate whatever slim chance there is of a diplomatic solution to the Iranian nuclear program and its rising power in the Middle East.

With whom exactly is the United States supposed to negotiate such a solution? The Iranian ambassador to Baghdad, Hassan Kazemi-Qomi, is a Quds force commander, according to Gen. David Petraeus, the top U.S. military man in Iraq. Does that mean that U.S. ambassador Ryan Crocker,­ who has met twice with Kazemi-Qomi, cannot speak to him again? Or just that Crocker can’t lend him money?

One man's terrorist is another's diplomat.

Petraeus seemed surprised that Iran would send a military man to Baghdad as its ambassador. Given Iran’s security concerns about its neighbor and the perilous state that Iraq is in, it would be surprising if Iran sent someone who was not a member or veteran of the Guards or its Quds branch.

Far from being the rogue operation the Bush administration portrays it to be, the Quds or Jerusalem force is an elite unit, from the Iranian government perspective, that has been a key element in Iran's security and defense policy for more than a quarter century. Kazemi-Qomi is among scores of members and veterans of the Quds force and the Guards who hold senior positions in the Iranian government. Hopes of stabilizing Iraq, Lebanon and to some extent, the Palestinian territories and Afghanistan, could rely on the U.S. ability to deal with these people and to acknowledge their growing role, for better or worse, in the Middle East.

U.S. military and intelligence have a long and mostly bitter history of tangling with the Quds force and Guards and the Arab militant organizations they have spawned. Hezbollah was such a creation, formed by the Guards after the Israeli invasion of Lebanon in 1982. In 1983, Hezbollah staged suicide attacks against U.S. and European forces who had intervened in support of a pro-Israel Lebanese government. Attacks on the U.S. Embassy, the Marine barracks and a French military compound killed 361 people, including 258 Americans.

The Quds Force is said to have helped train a Saudi Shiite group, Saudi Hezbollah, which blew up a U.S. Air Force barracks in Saudi Arabia in 1996, killing 19 Americans and wounding hundreds, after the Clinton administration slapped a comprehensive economic embargo on Iran.

In Iraq, the Quds force has forged links with a variety of Shiite militant groups, beginning long before the U.S. invasion. One such organization, the Badr Brigades—like Hezbollah, an Iranian creation in the 1980s—formed from Iraqi Shiites fleeing Saddam Hussein. Since Saddam's overthrow, Iran has spread its bets by offering arms and training to the Mahdi Army and other Shiite factions. The United States alleges that Iran is the source of powerful explosives that have killed dozens of American troops.

However, the Quds force and the United States have not always worked at cross purposes. The Bush administration is also close to the Supreme Islamic Council in Iraq, the political party affiliated with the Badr Brigades. Iran backed the Northern Alliance, an anti-Taliban Afghan group, long before the Bush administration threw its support behind the militia after 9/11. Senior Quds force officers were present as advisers when the alliance captured Kabul in November 2001.

Mohsen Rezaie, who commanded the Guards from 1981 to 1997 and who helped found the Quds force as the Guards' external arm, described the Iranian role in Afghanistan to me in 2005—an account that was confirmed by the CIA. Rezaie has been trying to broker negotiations between the United States and Iran at least since 2003, when he proposed the creation of a new security organization in the Middle East.

Rezaie was among four candidates with Guards backgrounds who ran for president of Iran in 2005. The others were the victor, Mahmoud Ahmadinejad, Mahmoud Qalibaf, currently the mayor of Tehran, and Ali Larijani, until this week, Iran’s top nuclear negotiator. Does Thursday’s designation that Guards Corps is an “entity of proliferation concern” mean that Secretary of State Condoleezza Rice could not meet with Larijani if Iran were to accept U.S. preconditions for talks?

The military component of Iran's government has historically been strong and has gotten bigger since Ahmadinejad's election. Quds and Guards veterans head about half the ministries in his cabinet and hold a third of the seats in parliament. They run Islamic foundations that control a significant portion of Iran’s wealth and chair corporations in charge of major construction projects. Many perform diplomatic roles. In 2006, a deputy national security adviser and former Quds force commander, Mohammad Javad Jaffari, sought backchannel talks with the Bush administration. Not only was he rebuffed but in January, the U.S. military tried to arrest him when he visited the Kurdish city of Irbil. Jaffari escaped but five others—consular officials according to the Kurds and Iran; arms providers according to Washington—were apprehended and remain in U.S. custody without formal charge.

Jaffari—Iran’s premier expert on Iraq—turned up at a meeting Rice attended in Egypt last May about how Iraq’s neighbors might help stabilize the country. He will presumably attend a meeting scheduled early next month in Istanbul about the same subject. Does the Bush Administration want the Turks to arrest him instead?

Targeting the Quds force and the Guards has become popular within the Bush administration and among some prominent Democrats, including Hillary Clinton, who supported the recent non-binding Senate resolution declaring the Guards a terrorist group. Assuming that the United States cannot overthrow the Iranian government, however, some U.S. administration will eventually have to deal with the regime as a whole. Only a settlement supported by the entire leadership of Iran can ease the U.S. predicament in Iraq and help stabilize a troubled Middle East.

Barbara Slavin is a senior fellow at the U.S. Institute of Peace and author of Bitter Friends, Bosom Enemies: Iran, the U.S. and the Twisted Path to Confrontation. The views expressed here are her own.