The Argentine government, saying it is nearing a breakthrough in the investigation of two bombings of Jewish centers in recent years, has arrested eight Iranian residents and ordered the expulsion of seven of Iran's eight embassy employees stationed here.

Senior officials say Argentina is close to breaking relations with Iran, acknowledging that U.S and Israeli intelligence officials have been correct for years in asserting that Tehran played a direct role in the 1992 bombing of the Israeli Embassy here and the 1994 bombing of the Argentine Israeli Mutual Association, the city's main Jewish community center. A total of 114 people died as a result of the two attacks.At a news conference Friday night, Foreign Minister Guido Di Tella said "potential but very significant evidence" had prompted the government to downgrade relations with Tehran and consider even stronger actions in the next few days. He said Argentina would remove one of its two remaining diplomats in Tehran. Both nations had withdrawn their ambassadors after the 1994 bombing.

Abdolrajim Sadatifar, Iran's senior diplomat here, denied any Iranian involvement in the bombings in interviews with Argentine journalists. "We don't want to break, destroy or damage our bilateral relations," he said, asserting that Buenos Aires was responding to "international pressures."

Iran announced that it was preparing economic sanctions against Argentina, hinting that it could block more than $600 million in Argentine imports.

The deterioration in Argentine-Iranian relations came only days after the U.S. FBI Director Louis Freeh arrived in Buenos Aires and met with President Carlos Saul Menem to discuss improving cooperation against international drug trafficking and terrorism. Freeh told reporters that U.S. and Argentine investigators had made major strides in recent months in determining who was behind the bombings, and that the FBI would deliver a detailed report on its findings to the Argentine government next month.

A federal judge, Juan Jose Galeano, the lead Argentine investigator in the case, has heard testimony in recent days linking Mohsen Rabbani, the former cultural attache at the Iranian Embassy, to the two bombings. Several Iranian witnesses reportedly told the judge that the Iranian diplomat had falsified passports and even given orders to terrorists who carried out the attacks.

Rabbani left Argentina 10 months ago, and was told by Argentine officials never to return.

Islamic Jihad, one of the armed groups linked to Hezbollah, which is based in Lebanon, has asserted responsibility for the attack on the Jewish community center.