Tensions between Cambodia and Thailand were inflamed yesterday after Thaksin Shinawatra, the ousted Thai Prime Minister, was welcomed in Phnom Penh.

Relations between the neighbours — engaged in a border dispute — deteriorated further after Thaksin accepted a new role as economic adviser to the Cambodian Prime Minister, Hun Sen.

The move was seen in Bangkok as a provocation and Thai opponents of Thaksin threatened to demonstrate against his return to the region.

On Cambodian television, Mr Hun Sen was seen embracing his guest and was said to have described him as an “eternal friend” and “the best adviser with economic leadership”. Thaksin is due to give a lecture to ministers and government officials tomorrow.

“Thaksin is here for the economy and not activities related to politics,” Phay Siphan, a spokesman for the Cambodian Cabinet, said. “It is an honour for Cambodia’s economic sector and we hope that Cambodians nationwide welcome him warmly.”

Mr Hun Sen’s hospitality had less to do with Thaksin’s economic expertise than with the relationship between Phnom Penh and Bangkok.

Their differences date back to the Khmer Empire, a Cambodian civilisation which ruled large parts of Thailand between AD800 to AD1370. Today Cambodia is poorer than its former vassal but a sense of resentment and rivalry lingers on both sides, which periodically flares into violence.

Soldiers on both sides died in skirmishes last year over a few hundred square metres of disputed territory close to the ancient Preah Vihear temple. The Thai Foreign Minister, Kasit Piromya, is a Yellow Shirt leader who, before his appointment as his Government’s chief diplomat, described Mr Hun Sen as a “a gentleman with the mind of a gangster”. Now the Cambodian leader is taking his revenge by flaunting his friendship with Thaksin.

Thailand responded by recalling its ambassador to Phnom Penh, and made moves to cancel a joint agreement to explore energy reserves in the Gulf of Thailand. It has begun extradition proceedings against Thaksin, who last year was sentenced to two years in prison for corruption when he was Prime Minister.

It has no hope of success because Cambodia regards the case as a political matter and therefore excluded from an extradition treaty between the countries.

Thaksin told The Times in an interview on Monday that he had no intention of settling in Cambodia, but would visit it from his exile in Dubai.

His proximity to Thailand and especially to the country’s northeast where he has his most loyal support, is unsettling to the Government, which is supported by army generals who removed Thaksin from power.

Anti-Thaksin activists, known as the “Yellow Shirts”, announced a rally in Bangkok this Sunday after remarks that he made in an interview with The Times about the Thai royal family.

The visit comes days before a summit in Singapore between President Obama and leaders of the Association of South East Asian Nations (Asean), also scheduled for Sunday.

George Yeo, Singapore’s Foreign Minister, said that the dispute had caused alarm, adding: “We are very concerned about this bilateral problem between two fraternal members of Asean and we hope they will find a way to reconcile and to act with restraint.” Previous Yellow Shirt rallies have led to fights with Thaksin’s supporters and brought chaos to Bangkok.

Last year the group took over Government House and seized the city’s two airports, stranding tens of thousands of passengers and damaging the tourism industry.

Tensions are at a peak again as Thaksin returns to South-East Asia, the closest he has been to Thailand since he was forced out in a military coup in 2006.

In April, Thaksin promised his supporters: “If there is the sound of gunfire, of soldiers shooting the people, I’ll return immediately to lead you to march on Bangkok.”

He told The Times: “If I were to start the march I would start from the north-eastern part of Thailand, on the soil of Thailand, but I will have to enter Thailand from the border. I can enter Thailand from Laos, Cambodia, Myanmar [Burma].”

In a message to his supporters on Twitter yesterday, he wrote: “Tonight I will meet and have dinner with Hun Sen and his family. I miss home so much.”

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