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PHNOM PENH (Reuters) - Cambodia on Tuesday released a jailed Thai activist whose 2011 sentence for spying stoked a long-running diplomatic row with neighbouring Thailand that escalated into border skirmishes between rival troops.

The pardon for Veera Somkwamkid, an ultra-nationalist jailed for eight years for espionage and trespassing, is the latest move by Prime Minister Hun Sen to develop a relationship with the military running Thailand since a May 22 coup.

The gesture appears to be an abrupt change in stance by Hun Sen, a shrewd, veteran politician who caused a stir in 2009 when he offered asylum to Thaksin Shinawatra, a fugitive former Thai premier, whose sister Yingluck Shinawatra led the government toppled by the generals in May.

Veera commanded a splinter faction of the "yellow shirts", an anti-Thaksin movement once backed by Thailand's conservative establishment and military and reviled by Hun Sen because of its fierce nationalist agenda against Cambodia.

Hun Sen was accused of provocation and of trying to deepen Thailand's protracted political rows by siding with Thaksin and his allies and refusing to extradite him.

Eang Sophalleth, an aide to Hun Sen, said Veera was freed in response to a request by Thailand's junta chief General Prayuth Chan-ocha, relayed by its acting foreign minister Sihasak Phuangketkeow during a visit to Phnom Penh on Tuesday.

"Both sides need to maintain the existing relationship and strengthen it," the aide told reporters.

Tensions between the countries have escalated during the past decade over territorial disputes and clashes have taken place between rival armies, the worst in April 2011, when at least 15 troops were killed and tens of thousands of people displaced.

Hun Sen told Sihasak he was pleased Cambodian migrant workers would be allowed to return to Thailand after some 200,000 had fled in fear of a crackdown on illegal labour.

"Hun Sen said that what had happened in Thailand was not pre-planned, it may have happened urgently and it may have been a last-choice decision," he said, referring to the coup.

(Reporting by Prak Chan Thul; Editing by Martin Petty and Foo Yun Chee)

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