Talks between Thailand and Cambodia appear to be easing mounting tensions along their common border which erupted into fighting earlier this week as the two countries pull back from a dangerous brink.

With political agendas dominating strategy on both sides of the Thai-Cambodia border, the two countries appeared to be on the verge of war Wednesday over the disputed ancient Preah Vihear temple after soldiers exchanged fire, leaving at least two combatants dead and several others wounded.

Although the situation remains tense, with Cambodian and Thai soldiers suspiciously watching each other, fears of an all-out war have calmed substantially following talks Thursday, and with conciliatory comments from both governments, in contrast to their belligerent posturing earlier.

"People should understand that there won't be any large-scale war taking place," Cambodia's prime minister, Hun Sen told reporters in Phnom Penh Friday after the regular weekly cabinet meeting. "People living near the border have nothing to worry about."

After their earlier exchanges, threatening to fight to the bitter end, both Cambodia and Thailand now seem prepared to try to negotiate a way out of the impasse. "We have re-affirmed our stance to exercise restraint and put the disagreement on the table," the Thai foreign ministry spokesman, Tharit Charungvat, told journalists Thursday after the border meeting between the two countries. "With the world economic crisis knocking on our door, it makes little sense for two neighbors to be waging war," he added.

"We will use negotiation as the means to solve the problem," Thailand's Prime Minister, Somchai Wongsawat, promised Thursday, playing down the previous day’s skirmish. "Though there was a clash yesterday, it was not a major one," he said.

The talks so far have achieved little. The two sides have agreed to remain where they are and have conducted joint patrols in the area. "We understood each other," said Cambodia’s Defence Minister Tea Banh. "We cannot patrol individually because it could lead to a misunderstanding," he added.

So far so good: "It is a good sign that military officials of both sides have an opportunity to talk with each other. It is not worrying now," Somchai told journalists in Bangkok after the border meeting. "Official-level talks will finally lead to a further meeting of top military commanders," he said.

There have been frequent attempts to negotiate a settlement in the past three months, since hostilities flared over the temple. This time both sides realize that their drumbeating rhetoric could easily lead to an unwanted war in which both countries have much to lose, economically and politically — but neither government can be see to be backing down.

"The real crisis is over, and both sides are now serious about returning to the table to talk the issue through," Kavi Chongkittavorn, the English-language daily newspaper the Nation’s senior political editor said in an interview.

For their part, the Cambodians are keen to internationalize the issue, and are preparing to raise the alleged Thai incursion before the United Nations Security Council in New York, according to Cambodian government officials. Since the dispute over the temple threatened bilateral relations and erupt into violence three months ago, Phnom Penh has asked the 10-member Association of Southeast Asian Nations to mediate. Thailand has consistently rejected these moves, insisting that the issue can only be resolved bilaterally.

Both Thailand and Cambodia have claimed the 11th century Hindu temple as theirs for decades. Legally the shrine belongs to Cambodia, though there are competing claims as much of the territory around the site remains disputed. The dispute has dogged relations between the two countries for centuries, according to Sumet Jumsai na Ayudhaya, a Thai historian and architectural expert. "The ownership of the temple is based on a French map drawn in 1904, which inexplicably excluded the archeological site from the Thai side," he said in an interview.

The French then were Cambodia’s colonial rulers. It was this map that provided the basis for the International Court of Justice’s judgment in Cambodia’s favor. Thailand of course never accepted the court’s verdict and has continued to challenge the map’s validity.

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The current hostilities erupted into violence in July while the UN’s cultural agency, UNESCO was considering Phnom Penh’s application to make Preah Vihear a World heritage site. Originally the besieged Thai government, then led by Samak Sundaravej, endorsed the application, but Thailand’s complicated and tumultuous political situation got in the way. The government withdrew its support after the opposition Democrats and anti-government protestors occupying Government House accused the Peoples Power Party of selling out Thai interests and territory in return for business concessions in the nearby area to the former Thai Prime Minister, Thaksin Shinawatra, and a leading figure behind the PPP.

The Constitutional Court ruled that the Thai government’s formal endorsement of Cambodia's plans for the temple were unconstitutional. The foreign minister was then forced to resign after the government survived a no-confidence motion.

"It’s this nationalistic fervor on the part of the protestors that means the government cannot appear to be weak," said the Nation’s Kavi Chongkittavorn. "It’s a classic case of international affairs becoming a domestic issue. If mishandled, it’s a certain recipe for disaster."

Thousands of celebrating Cambodians poured onto the streets of Phnom Penh in July when UNESCO made the temple a World Heritage site – egged on by the Cambodian government and Prime Minister Hun Sen in particular, who described the decision "a new source of pride for the people of Cambodia". UNESCO also referred to the French colonial map in its verdict.

Previously Thailand had blocked Cambodia's efforts to list Preah Vihear on the grounds that a 4.6-square-kilometer stretch of land around the temple compound was still disputed. It is this piece of land, not covered by the recent ruling, where the two countries’ forces are still facing off and where the fighting broke out earlier this week.

The war of words escalated out of control earlier this week Hun Sen surprisingly upped the stakes and issued an ultimatum to Thailand to withdraw some 80 soldiers stationed on a portion of the temple area that is in dispute. "We will not allow Thai troops to invade this area, whatever the cost," Hun Sen said on Tuesday. "I would like to be clear about this. It is a life-or-death battle zone."

The Thai army chief instructed his troops to stand fast and resist any Cambodian invasion into Thai territory. Both sides rushed extra reinforcements, according to eye-witnesses on either side of the border. Hun Sen ordered the Thais to withdraw from the disputed area by noon Wednesday or face the consequences. But his noon deadline passed – with Cambodia claiming that the Thais troops had retreated and Thailand insisting nothing of the sort. Tensions mounted continued to mount until eventually they turned into violence later in the day.

This wasn’t the first time. Earlier this month one Cambodian and two Thais were reportedly wounded in an exchange of fire. A few days later, on 6th October, two Thai soldiers lost their legs when their patrol stepped on landmines in the area.

Now the hope is that further talks can defuse the situation along the border, and at least insure it doesn’t erupt into more into more violence.

But both governments have their specific political agendas. Thailand’s besieged government has little room to maneuver, lest the protestors on the street again accuse them of being traitors. Hun Sen is using the situation to strengthen his hand at home and establish his credentials as a regional leader.

"Hun Sen is flexing his muscles," Kavi Chongkittavorn said. "He is by far the longest-serving leader in Asean and wants to assert his authority as the senior statesman in the region."

Both countries are economically dependent on each other – and already the dispute is beginning to bite. Thai exports to Cambodia have dipped dramatically since the dispute re-emerged three months ago and it may be that economic matters in the end may encourage cooler heads.

"Common sense is likely to prevail, as both countries know they have more to lose economically than they can gain politically if the conflict escalates further," a Thai diplomat told Asia Sentinel, but declined to be identified.

But in a further twist to the conflict, Thai hopes to turn the tables on Cambodia by taking the case of the Thai troops injured in the mines explosion a month ago to the UN.

"Thailand plans to complain to the UN Secretary-General Ban Ki-Moon about land-mines planted by Cambodia on Thai territory," according to a senior Thai diplomat, Chakarin Chayabongse. "This is a serious violation of the 1997 Ottawa mine ban treaty which both Thailand and Cambodia have signed," he said. The two mines involved are Russian-made, and will be presented to the UN to support their complaint.

Thousands of mines are strewn along the border area, a legacy of decades of conflict in Cambodia. The UN and other international organizations have been conducting mine-clearing operations through Cambodia for more than a decade, though experts believe only a fraction of the mines have been removed.

Thailand believes these mines though were recently planted by Cambodian military personnel near the disputed land around the temple. The route taken by the Thai soldiers was believed to have been cleared. Villagers constantly use it to get to their farms, according to Thai foreign ministry officials.

Cambodia has rejected the Thai claims. "Cambodia reaffirms the fact that landmines in this border area are remnants of almost three decades of war," according to a press statement issued by the Cambodian foreign ministry. The Thai troops must have stepped on one of these mines left over from the civil war, he added. Cambodia adheres to international treaties banning land-mines, the statement insisted.

So while talks between the two countries may have resumed, there is little evidence that the dispute will be solved anytime soon. There is no doubt that the whole issue of Preah Vihear is one whole minefield ready to erupt again at anytime.