TSR: "In fact, it may even spur it on."

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MILES O'BRIEN: When Islamic militants took power in Iran three decades ago, they didn't trust the existing army. They created their own force, the Army of the Guardians of the Islamic Revolution. The Guards got their own intelligence wing, along with air, naval and ground forces.

Now, take a look at these military exercises earlier this year. That's not the regular army, that's the Revolutionary Guard.

Iran's president, Ahmadinejad, joined the Revolutionary Guard back in 1986. If the Bush administration follows through with its plan, this would be the first time official armed units of a sovereign state are added to the list of outlawed terror groups.

U.S. commanders in Iran's Revolutionary Guard say it's been arming and aiding militants who attack U.S. troops.

Could economic sanctions against the Guard put an end to such activity?

CNN's Michael Ware is in Baghdad.

MICHAEL WARE, CNN CORRESPONDENT: The Revolutionary Guard Corps doesn't exactly do a lot of banking or business transactions with American companies or organizations. So, no. This is merely symbolic.

And will it stop the flow of bombs and arms which have been put in the hands of Shia militias and are killing U.S. troops?

No. In fact, it may even spur it on. To General Suleimani, the commander of the elite Quds Force within the Revolutionary Guard, he may see this as such an act of desperation that he may think that, "I'm hurting America, let's keep going."

That's certainly what we've been seeing this year.

O'BRIEN: Let's shift gears just a little bit.

You were on patrol just recently in Diyala and you came back with some very interesting insights.

Give us a little taste of the story you have.

WARE: Well, what we're talking about is going into one of Al Qaeda's known nests. Now, this is an area just north of the capital, Baghdad, beyond the much heralded surge of U.S. troops, into a zone called the DRV, the Diyala River Valley.

Now, for years, because America has not had enough combat troops here in Iraq, Al Qaeda has owned that valley. They set up their own government, transportation units, a military wing, Sharia courts. They executed their own kind of justice.

Indeed, we have an exclusive video seized by troops during a raid on one of these Al Qaeda holdouts which shows a public execution. The entire village gathered to watch a man have his head hacked off. And it's only now, this year, that 300-odd American paratroopers have been thrown into the fight to re-take that valley and we were with them -- Miles.

O'BRIEN: Michael Ware in Baghdad.

Thank you very much.

You can see Michael Ware's full report tonight on "ANDERSON COOPER 360," 10:00 Eastern, right here on CNN.