BANGKOK, Thailand - Thailand announced Friday it plans to back out of an offshore border agreement with Cambodia, the latest barb in a diplomatic dispute fueled by Phnom Penh's appointment of ousted Thai Prime Minister Thaksin Shinawatra as a government adviser.

The moves comes a day after both countries recalled their ambassadors and makes good on a Thai promise to review all its agreements with Cambodia.

The Wednesday appointment of Thaksin as an economic adviser to Cambodia's government soured already poor relations between the two neighbours, which have had small, but sometimes deadly, skirmishes over their land border in the past year. There was no immediate sign of a new confrontation on that front, however.

The diplomatic dispute is closely tied to an ongoing political struggle within Thailand, where Thaksin's supporters and opponents have repeatedly taken to the streets over the past two years to spar over who has the right to rule the country since the former leader's ouster in a 2006 military coup. The protests have sometimes turned violent and once shut down the Thai capital's airports for a week.

Thaksin was convicted in absentia last year of violating a conflict of interest law and sentenced to two years in prison. Thai officials frequently claim he is trying to undermine the current government, made up of his opponents, while he is in self-imposed exile.

Thaksin was prime minister when a 2001 memorandum of understanding on overlapping claims in the Gulf of Thailand was signed with Cambodia. His involvement was one of the reasons the Thai Foreign Ministry gave for planning to terminate the agreement.

The purpose of the agreement was to eventually find a way to jointly develop oil and gas resources in the disputed waters.

In practical terms, the revoking of the agreement makes little difference, since no progress has been made in negotiations. Thai Foreign Minister Kasit Piromya, who is in Tokyo for a regional meeting, said he would propose its cancellation to the Thai Cabinet, the Foreign Ministry said in a statement.

Cambodia said any such cancellation would be invalid.

Cambodia has sometimes prickly relations with its bigger, richer neighbour, most vividly illustrated in 2003 when the Thai Embassy in Phnom Penh was burned down by rioters over a remark by a Thai actress that allegedly called into question the country's sovereignty over a landmark temple.

Thaksin, a former telecommunications tycoon, had substantial business interests in Cambodia and was accused of pursuing special deals there for his family-controlled conglomerate while prime minister.

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Associated Press writer Sopheng Cheang contributed to this report from Phnom Penh, Cambodia.

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