Thai diplomats handed over papers for the extradition of the tycoon, who was ousted in a 2006 coup and lives in exile to avoid a jail term for graft, but almost immediately Cambodian officials gave them a formal refusal letter.

"This response letter is enough to tell the foreign affairs ministry of Thailand that there will be no extradition," Cambodian Prime Minister Hun Sen said at a televised press conference alongside Thaksin in Phnom Penh.

Hun Sen said Cambodia was refusing to send the billionaire back to Thailand, arguing that the charges on which he was sentenced in absentia to two years in prison were politically motivated.

"You see, some leaders have been toppled during times of provocation but Thaksin was toppled during a time he was on a mission for his nation. So he is a political victim of the coup d'etat of Sept. 19, 2006," Hun Sen said.

Hun Sen added that he would not discuss Thaksin's new advisory role with Thailand if he meets with Thailand's prime minister at a summit of regional leaders with U.S. President Barack Obama in Singapore on Sunday.

Thaksin and Hun Sen have been close friends for years and are also occasional golfing partners, with reports saying that they planned to play a round in the tourist town of Siem Reap on Friday. Thaksin used the press conference, held at Hun Sen's house on the outskirts of Phnom Penh, to accuse the Thai government of Prime Minister Abhisit Vejjajiva of having a "cold war mentality." Thaksin is due to give a speech to 300 Cambodian economics experts today. Cambodian officials have said he will stay in the country for two or three days but is not intending to live there. In Bangkok, Abhisit condemned the Cambodian refusal to send Thaksin back, and said that he had halted more aid programs for the neighbouring country, which is still impoverished after decades of war.

"My government wants bilateral ties to be normal, but Cambodia's political standpoint is incorrect, inappropriate and against international principles," Abhisit told reporters.

Thailand and Cambodia recalled their ambassadors last week as the row escalated. Bangkok also put all talks and cooperation programs on hold and tore up an oil and gas exploration deal signed during Thaksin's time in power.