Thailand and Cambodia stepped back from the edge of war today after a bizarre territorial dispute over a remote and ancient Hindu temple threatened to explode into military conflict.

Cambodia reported that Thai soldiers had made a last-minute retreat from disputed territory close to the Preah Vihear temple on the mountainous jungle border between the two countries, just before a noon ultimatum set by the Cambodian Prime Minister, Hun Sen.

Thailand denied that it had moved troops, and insisted that it would defend its claim to the few hundred square metres of disputed land. “The Thai armed forces agreed to maintain troops in the area because that area is claimed by both Thailand and Cambodia,” the Thai army said in a statement. “All three armed forces — army, navy and air force — are ready for confrontation in the area and are confident in our potential to defend Thailand's sovereignty.”

This morning, Mr Hun Sen, drastically escalated the terms of the dispute by threatening a “life-and-death battle” if Thailand did not pull back. “They must withdraw. We will not allow Thai troops to invade this area at any cost. I would like to be clear about this . . . it is a life-and-death battle zone.”

Cambodian officers reported the retreat of 84 Thai soldiers from the area, just before the deadline. “The situation seems to have returned to normal,” General Chea Mon told Reuters. “Our troops are occupying the area where the Thai troops have pulled out.” Thailand insists that the soldiers were simply dispatched to clear mines after two of them lost their legs in mine explosions this month.

Whatever the truth, there has been a temporary respite in a seemingly trivial dispute that has provoked heated rhetoric from both of the South-East Asian neighbours. Perched on the top of a 1,600ft cliff, Preah Vihear is far more accessible from Thailand than from Cambodia, but it was to Cambodia that the territory was awarded in a ruling in 1962 by the International Court of Justice, after lengthy legal arguments about the validity of maps of produced during Cambodia’s French colonial period.

Its inaccessible position made it a natural fortress for successive armies that battled over Cambodia — it was the last stronghold of the forces of the Lon Nol regime, driven out by the genocidal Khmer Rouge in 1975. Even after their own defeat, Khmer Rouge forces held out in the temple until 1998.

Ill feeling was defused by allowing Thai locals and tourists to visit the temple freely from Thailand without a visa, and the dispute was largely forgotten until July this year, when Unesco, the United Nations cultural organisation, granted an application for Preah Vihear to be designate a World Heritage Site.

The decision would do much to promote tourism to Preah Vihear and bring business to both sides. But when it emerged that the Thai Government had supported the application, nationalists in Bangkok accused ministers of selling Thai territory in return for business concessions form the tourist industry. Thailand’s constitutional court ruled that endorsing the Unesco application without permission from parliament was illegal, and Thailand’s former foreign minister resigned as a result.

His successor, Sompong Amornviwat, spent Monday in Phnom Penh attempting to negotiate a solution, but Cambodia was infuriated by reports that Thai soldiers had again moved into the area even as the talks were taking place. “If any war happens, it will be tomorrow,” Mr Hun Sen said. “We will not let the Thais stand on our land.”

Apart from preserving national self respect, neither side has much to gain from a military conflict. The 300,000 strong Thai military has advanced equipment, including jet fighters from the US. The Royal Cambodian Armed Forces are barely a third as big, and poorly equipped. But many of its troops are experienced former fighters of the Khmer Rouge who could quickly bog the Thais down in a costly guerrillas. war.

Despite the tension, there has been only one exchange of fire — on October 3, when one Cambodian soldier and two Thai soldiers were injured.

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