Following the arrest in Britain of Hadi Sulaymanpour, Iran's President, Mohammad Khatami, targeted the UK in remarks on Iranian state radio on Sunday.
"I hope that the British Government will swiftly go back on this incorrect action and apologise," he said, in an interview reported by the BBC. Khatami insisted the arrest was politically motivated.
"There are currents behind the case trying to put the Islamic Republic under pressure by levelling baseless accusations and unfounded allegations against Tehran," he said.
Hadi Sulaymanpour, 47, was arrested in Britain last Thursday after Argentina requested his extradition in connection with the AMIA Jewish Community Centre blast that killed 85 people in Buenos Aires. He was ambassador there at the time.
Argentine ties cut
Khatami's comments fuelled a row that ignited on Saturday, when Iran cut economic and cultural ties with Argentina.
Iranian state media quoted Foreign Ministry official Mehdi Mohtashami announcing measures against Argentina in light of the former envoy's arrest, Reuters reported.
"Iran's foreign ministry official in charge of the Americas desk announced Iran's strong objection to the Argentine judiciary's measure and informed him (the Argentine charge d'affaires) of Iran's decision on halting cultural and economic cooperation with Argentina," Mohtashami was quoted as saying.
President Mohammad Khatami:
Arrest was politically motivated
Argentina has a charge d'affaires but no ambassador at its embassy in Tehran, the same level of representation Iran keeps in Buenos Aires.
Diplomats said the Iranian initiative could affect Argentine exports to Iran, which include wheat, sunflower oil, rice and other basic foodstuffs.
Tehran denies bombing role
Iran denies any involvement in the Buenos Aires bombing and previously withdrew its ambassador from Argentina in protest at the accusation.
Britain's charge d'affaires in Tehran, Matthew Gould, said he had told Iranian Foreign Ministry officials Sulaymanpour's arrest was not politically motivated, and the court's decision was independent of the British government.
"The British government cannot interfere at this stage of the extradition process," he said, according to Retuers. He added that he had been summoned to the Iranian Foreign Ministry and asked for the immediate release of the former diplomat.
Sulaymanpour has been in Britain on a student visa since February last year, studying at Durham University.