* Commission seen as diplomatic victory for Tehran
* Plan comes as U.S. leads push to isolate Iran
* Israel is "disappointed," wants explanation from Argentina (Adds reaction from Israel, Fernandez comment, background)
By Hugh Bronstein
BUENOS AIRES, Jan 28 (Reuters) - Israel and world Jewish groups denounced plans by Argentina and Iran to form a truth commission to investigate the deadly 1994 bombing of a Buenos Aires Jewish center that Argentine courts say was sponsored by Iran.
The forming of the commission, announced during the weekend, was seen as a diplomatic win for Iran as it confronts a U.S.-led effort to isolate Tehran because of its nuclear program.
Western nations fear Iran intends to use the program to produce atomic weapons. Israel regards this as an existential threat, citing statements by Iranian President Mahmoud Ahmadinejad about wiping the Jewish state off the map.
"The agreement between Argentina and Iran is received in Israel with astonishment and deep disappointment," Israel's Foreign Ministry said in a statement. "The Argentine ambassador in Israel will be summoned to the Ministry of Foreign Affairs in Jerusalem to provide explanations."
Argentine courts have said Iran was behind the attack on the Jewish center, which killed 85 people. The commission agreement, which must be approved by Argentina's Congress, outlines plans for Argentine officials to interview suspects in Iran - not in a third country, as originally proposed by Argentina.
"Forming a joint truth commission with Iran is a farce," Shimon Samuels, Paris-based director of international relations for the Simon Wiesenthal Center, told Reuters on Monday.
"It will whitewash terrorism and encourage the mullahs to become patrons of further attacks."
The bombing came two years after a group linked to Iran and the Lebanese militant group Hezbollah claimed responsibility for a bomb attack on the Israeli Embassy in the Argentine capital, which killed 29. Tehran has denied links to either attack.
Led by Washington, the West has imposed sanctions on Iran - including directly targeting its key oil revenues - to try to force it into a diplomatic solution that would lay to rest Western concerns that it is seeking to develop a nuclear bomb.
"The benefits of a truth commission are not evident for Argentina," said Ignacio Labaqui, a political science professor at Catholic University in Buenos Aires. "As for Iran, it's pure gain. It makes no real concessions and it becomes less isolated."
WANTED BY INTERPOL
In 2007, Argentine authorities secured Interpol arrest warrants for five Iranians and a Lebanese in the bombing of the AMIA Jewish community center. Iranian Defense Minister Ahmad Vahidi is among the officials sought by Argentina, which is home to Latin America's largest Jewish community.
The five "truth commissioners" will be jointly named and will not be residents of Argentina or Iran, according to a document posted on President Cristina Fernandez's Facebook page.
"Dialogue (is) the only way to resolve conflicts between countries, however severe," she said on Sunday via Twitter.
The agreement on the commission said that after analyzing the evidence the commission "will give its vision and issue a report with recommendations about how the case should proceed within the legal and regulatory framework of both parties."
Fernandez, who is allied with left-leaning Latin American leaders who are on good terms with Tehran, such as Venezuela's Hugo Chavez, hailed the accord as historic.
But Jewish leaders see no upside in forming a truth commission with Iran, where Ahmadinejad has questioned the Holocaust and where authorities arrested more than a dozen journalists in the past two days over their links to "anti-revolutionary" media.
Argentina's government also has been criticized for cracking down on dissent by fining private economists for publishing inflation estimates that far outpace the official numbers. The country could face sanctions from the International Monetary Fund over its widely discredited consumer price data.
"Forming a 'Truth Commission' which does not fall under Argentine law governing criminal proceedings marks a decline of our sovereignty," said a statement issued on Monday from Argentina's two main Jewish groups, known as the AMIA and DAIA.
"This is a setback for obtaining justice," it said. (Additional reporting by Allyn Fisher-Ilan in Jerusalem; Editing by Bill Trott)