American terror experts are suspicious of Hezbollah, an Iranian-backed guerrilla group that has fought a guerrilla war against Israel for years, said one official, speaking on condition of anonymity.
Evidence linking Hezbollah to the 1982 bombing of the Israeli Embassy in Buenos Aires is far stronger, the official said. Twenty-eight people died in the attack.
Hezbollah, known also as Islamic Jihad, was formed in 1982. It is a radical group based in Lebanon that takes its ideological inspiration from the Iranian Revolution of 1979 and the teachings of the Ayotllah Khomeini, the State Department said in a report.
According to The New York Times, a secret deposition asserts that Iran organized and carried out the bombing of the Jewish community.
The sealed testimony of a high-level defector from Iran's intelligence agency also alleges that Iran paid Carlos Saul Menem, Argentina's president at the time of the bombing, $10 million to deny Iran's involvement, the newspaper reported Monday.
The report surfaced five months before a December primary ballot that will pick candidates for Argentina's presidential election next year.
Although officials considered a possible Iranian connection early in the investigation, Iran has repeatedly denied such charges and few leads have been reported in the years since.
Menem's former chief of staff, now a key campaign adviser, denied the allegations in the report, calling them politically motivated.
"Every intelligence agency in the world had free passage in Argentina to investigate this case," Alberto Kohan told the newspaper. "We would all like to know who did it."
Eighty-five people were killed and more than 200 injured in the July 18, 1994, car bomb attack on the Jewish Community Cultural Center, one of two such attacks in Buenos Aires in the early 1990s. In March 1992, a blast destroyed the Israeli Embassy, killing 28 people. Jewish leaders have criticized authorities for failing to apprehend those responsible.
An Iranian defector to Germany identified as Abdolghassem Mesbahi asserts in a 100-page transcript of a secret deposition that planning for the attack on the community center was led and supervised by officials inside Iran's intelligence agency and its embassy in Buenos Aires.
Mesbahi alleges that Menem received a $10 million deposit into a numbered account to "make declarations that there was no evidence against Iran that it was responsible," the newspaper reported.
In his testimony, Mesbahi said Menem benefited for years from his ties to Iranian intelligence officials, the newspaper reported. They courted him because of his political power, Muslim ancestry and connections to Argentina's small but influential Syrian-Lebanese community, he said.
U.S. and South American authorities have long warned that the so-called "Triple Border" region, where Argentina, Brazil and Paraguay meet, could make an appealing harbor for terrorists because of its porous borders, its concentration of Arab-Muslim immigrants and lax passport controls.
Last year, the State Department warned in its annual report on global terrorism that the region - already known as South America's contraband capital -"remained a focal point for Islamic extremism in Latin America."
Some 5,000 people commemorated the eighth anniversary of the bombing with a candlelight vigil last Thursday, where some complained that another year had gone by with no new leads. Government officials deny any cover up, saying they conducted a proper investigation.
"The case remains unsolved and we still have no answers. We demand justice and we demand it now," said Abraham Kahul, president of the Jewish Community Cultural Center.
Fifteen former police officers have been arrested, accused of having indirect roles in the bombing. They are accused of cooperating with those responsible for the bombing.