The European Union on Monday put the military wing of Lebanese Shiite group Hezbollah on its of terrorist organisations, a move that the group slammed as aggressive and unjust.
Analysts, however, were sceptical about the effectiveness of the measure, which Lebanon had warned against, saying it was virtually impossible to distinguish between the military and political wings of Hezbollah.
"In reaching this agreement, the EU has sent a clear message that it stands united against terrorism," the foreign secretary of Britain, which had pressed long and hard for the decision, said at the end of the one-day talks.
"We will have to distinguish as best we can" between the group's various parts, said William Hague. "Hezbollah has a political role in Lebanon," but "violence... is unacceptable."
In a statement, Hezbollah's armed wing said that "Hezbollah firmly rejects the EU decision... and sees it as an aggressive and unjust decision that has no justification and is not based on any proof."
Iran also denounced the decision, accusing the EU of acting in Israel's interests, Iranian media reported Tuesday.
Iran and Hezbollah are both sworn enemies of Israel and the Lebanese Shiite group has received Tehran's moral, financial and military support since its inception.
Iran "strongly denounces the (EU) decision... and believes (it) is in line with the illegitimate interests of the Zionist regime," Foreign Minister Ali Akbar Salehi was quoted as saying by official media.
"The European Union, due to lack of correct judgement about the regional crisis, took this wrong decision," Salehi said.
The action, he added, is "against the Lebanese people since Hezbollah has put up a legitimate defence against the Zionists' aggressions," he added.
Earlier, Lebanon's Hezbollah-run Al-Manar television said the EU had "surrendered to the wishes of Israel."
Hezbollah fought a bitter war with Israel in 2006 and more recently has been providing military support to the regime of Syrian President Bashar al-Assad as it tries to put down an insurgency that has escalated into civil war.
To get the required agreement of all 28 EU member states, ministers had to overcome reservations in some members that the move would further destabilise Lebanon, where the Iranian-backed militant group plays a key role in politics and has dominated the government since 2011.
Accordingly, EU political and economic ties with Lebanon will be fully maintained in a delicate balancing act.
Hezbollah's military wing was blamed for a deadly attack on Israeli tourists in Bulgaria last year.
In March, a Hezbollah operative was also convicted in Cyprus of plotting a similar attack.
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Monday's political decision will be given legal form within days and most likely result in sanctions such as an asset freeze.
In a statement from Washington, US Secretary of State John Kerry said the decision would mean a "crackdown on Hezbollah's fundraising, logistical activity and terrorist plotting on European soil."
The EU adopted a terror and sanctions regime in late 2001 after the September 11 attacks in the United States to target individuals and groups.
As of last year, there were 25 groups named, among them several Palestinian entities, Colombian insurgent movement FARC, and Peru's Shining Path.
There are just 11 individuals separately listed.
Lebanon had asked Brussels not to blacklist Hezbollah on the grounds it was an "essential component of Lebanese society".
And analysts were sceptical the measure would effective.
"It is the security wing, not the military, which is the most effective and the most dangerous in Hezbollah," said Waddah Charara, professor of sociology at Lebanese University.
"The EU move actually gives Hezbollah a lot of leeway, especially given that the party works in a secret fashion and operates through many channels."
The United States, Australia, Britain, Canada and the Netherlands had all previously blacklisted Hezbollah as a terror group.
Support for the EU sanctions against Hezbollah grew in recent weeks after the party admitted it was sending fighters to back the Syrian regime.
Israeli Justice Minister Tzipi Livni praised the EU decision, but Lebanese Prime Minister Najib Mikati said the EU states should have conducted "a careful reading of the facts and sought out more information."
Elsewhere at the talks, ministers highlighted the possible resumption of stalled Israeli-Palestinian talks after a major push by Kerry, and said there was a need to promote democracy in Egypt after the ouster of its elected government.
Ministers called on the Egyptian military to stand aside to allow a peaceful transition to a civilian government and to release political prisoners led by deposed president Mohamed Morsi.
Hague and other ministers deplored the deterioration of the situation in Syria, where regime forces have made inroads against the rebels, who are torn by bloody infighting and growing extremism.
There are concerns that funds for humanitarian aid needed by millions of refugees inside and outside the country are running short.