BERLIN, OCT. 17 -- German prosecutors said today they have arrested a Foreign Ministry employee accused of selling secret U.S. and German documents to Iraq.

Prosecutors said they are holding Juergen Mohammed Gietler, a 35-year-old archivist charged with receiving about $13,000 from the Iraqi Embassy in Bonn in exchange for secret reports outlining American assessments of the situation in Iraq and other Arab countries. The archivist is said to have passed on documents between March and late August of this year.

A Foreign Ministry source called the potential damage from the case "very grave." The source said Gietler -- who converted to Islam in 1987 after working in the German foreign service in Egypt -- delivered to the Iraqis accurate and up-to-date U.S. assessments of the situation in the Persian Gulf at least up to the Iraqi invasion of Kuwait Aug. 2. The archivist is also thought to have given Baghdad intelligence reports from West Germany and other Western countries.

Prosectors said tonight that the alleged spy reported to the Iraqis every week or two until he was arrested Aug. 28. It could not be determined whether his final reports included details of U.S. military plans in the gulf.

Bild, an often sensational German newspaper that has nonetheless proven to have excellent sources on intelligence matters, reports in an article for its Thursday edition that Iraq hired Gietler through the now-disbanded East German state security apparatus, the Stasi.

The archivist had about 200 secret dispatches in a plastic bag in his home in the Bonn suburb of Bruehl.

A spokesman for the federal prosecutor, Hans-Juergen Foerster, said it is not yet clear how much damage Gietler may have caused.

Bonn authorities have arrested hundreds of alleged East German spies in recent months. The most well-placed figures, including one who handled double agents for the West German intelligence office and another who helped prepare Chancellor Helmut Kohl's weekly intelligence briefing, have been uncovered in the two weeks since German reunification.

Lutz Stavenhagen, Kohl's top intelligence aide, said in an interview that he expects that Bonn will discover even more agents in the coming weeks. He said that the Kohl administration wants to offer a one-year amnesty to former East German spies to help clean out the agents still hiding in the Bonn government.

"They would lose their job, but in all but the most severe cases, they would go free, which is better than what would happen if we find them," Stavenhagen said. The all-German government is reluctant to punish the Stasi spies severely because "they believed they were working loyally for their country, getting medals and so on for their work."

Markus Wolf, the former chief of the East German spy service who is now in hiding from German authorities, has said his country had 4,000 agents working in West Germany. He has tantalized reporters and worried Bonn officials with his repeated statement that the most highly placed East German agent has yet to be uncovered.