In military exercises, you don't call the enemy you are practicing to fight by their real name. Not just "PC", but you don't want to start an international incident.
In the Cold War, we had all sorts of creative names for the USSR. I am not in the military, but I am sure vets would know.
We and the UK held the largest naval maneuvers since WWII back in 1996 and practiced "invading" VA and NC. I think the news this morning indicates something similar.
I think we called the hypothetical enemy "Orangeland", but not sure.
Iran is not PC at all. When they held their largest war games ever the folowing year, they called it "The Road to Jerusalem".
My group builds the sortie software for NATO. Once the wall came down, we had mix of east and west Germans in the room. One of the former east Germans looked at a practice training exercise and asked, "Who the hell is targeting Germany?". We responded by creating an imaginary set of islands west of Europe in the Atlantic. Various features of the real target area were transplanted and renamed. The NATO pilots were then able to create practice sorties to the imaginary island and still have a realistic set of distances, targets, refuel rendezvous and defensive elements. Until we invented the imaginary area, it was like walking on eggshells in a multi-national NATO military environment.
When WE used to train for a land battle in Germany facing the Russkies (this was the early 1980's) we always called them OPFOR (Opposing Forces). But funny, all the bad guy uniforms and equipment just happened to match WARSAW Pact stuff. What a coincidence!