Cambodia's choice of Thaksin as adviser sparked the latest diplomatic row with Thailand [AFP]

The warning came amid an escalating diplomatic row triggered by Cambodia's appointment of Thaksin as economic adviser.

The Cambodian government made the announcement on state television late on Wednesday, almost two weeks after Hun Sen, the prime minister, first floated the idea at a summit of Asian leaders.

Thaksin, who was ousted in a 2006 coup, is currently living in self-imposed exile to avoid a jail term for corruption if he returns to Thailand.

Thai officials said there were no plans for Abhisit Vejjajjiva, the Thai prime minister, to meet Hun Sen at a summit of Mekong River basin nations in Tokyo over the weekend.

Suthep Thaugsuban, the deputy prime minister, said on Friday that there were no reports of any incidents along the border so far and trading was going on as normal.

"If Cambodia still adopts a hard line and uncompromising attitude, then we must continue to downgrade relations and maybe seal off all border checkpoints," he said.

"Thaksin should ask Cambodian authorities to secure the Thai embassy and Thai interests in Cambodia."

Oil deal

The two sides have fought in series of deadly skirmishes since July 2008 over disputed land that surrounds the ancient Preah Vihear temple on the border.

Thai officials also said the government plans to scrap a 2001 oil and gas exploration deal with its neighbour to jointly develop a disputed area in the Gulf of Thailand.

The deal was signed during Thaksin's tenure.

"The foreign ministry has decided to terminate the memorandum of understanding between Thailand and Cambodia to develop the overlapping area which was signed by the Thaksin government," Kasit Piromya, the Thai foreign minister, said.

Kasit said the deal for a 26,000sq km area had made no progress in the last eight years and he would propose to the cabinet next week that it should be scrapped.

"The ministry believes that the appointment of Thaksin directly affects the agreement as he was fully aware of Thailand's position in dealing with Cambodia," Kasit said by telephone from the regional Tokyo summit.

In 2003 Cambodian protesters set fire to the Thai embassy in Phnom Penh, again after both countries recalled their ambassadors in a diplomatic row.

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