By Amy Sawitta Lefevre
BANGKOK (Reuters) - A cabinet reshuffle in Thailand has brought loyal allies of self-exiled former Prime Minister Thaksin Shinawatra into the government led by his sister, consolidating his grip on power as he bides his time before making a serious effort to come home.
Thaksin, ousted by the army in 2006, lives abroad to avoid a prison sentence for abuse of power but is widely thought to be running Southeast Asia's second-largest economy from bases in Dubai and elsewhere through Prime Minister Yingluck Shinawatra.
A former telecoms tycoon who first became prime minister in 2001, Thaksin enjoys huge support among the rural masses but has powerful enemies among the conservative elite, the military and royalist activists, all of whom, he says, undermined his governments or those of his allies.
Thaksin has set no date for his return which would be deeply divisive. Many analysts believe it could upset a fragile peace that has been in place since the army crushed protests by his supporters in mid-2010 and about 90 people were killed.
For now, Thaksin is moving his loyalists into position while Yingluck rides high in opinion polls and does not do anything to antagonize Thaksin's powerful enemies, in particular those in the army.
"We are seeing a Thaksin renaissance, with his top people being installed," said Kan Yuenyong, director of Siam Intelligence Unit, a private think tank in Bangkok.
The 23 new cabinet names endorsed on Sunday by King Bhumibol Adulyadej include six members of Thaksin's disbanded Thai Rak Thai party who re-entered politics after a five-year political ban against them for electoral fraud ended in May.
Other posts in the civil service and police have gone to Thaksin loyalists including Paradorn Pattanathabutr, who was made secretary-general of the country's National Security Council and this month said Thaksin was "like a brother".
For the time being, Thaksin has not tried to interfere too much with the army and powerful judiciary and risk stirring up a storm.
Also, plans to amend the constitution to facilitate his return that threatened to galvanize the opposition earlier this year have been put on the back burner.
"Time is on Thaksin's side, and after a year the Shinawatras have decided to go slow because it's better to be in the government than out of government," Kan said.
But in a reminder of instability and a taste of what could be in store, an anti-government rally on Sunday drew up to 10,000 people led by Boonlert Kaewprasit, a retired military officer, taking aim at what he see as nepotism in Yingluck's administration.
But for now, Thailand's highly political army has shown no signs of moving against Yingluck.
AVOIDING A BACKLASH
The new cabinet line-up leaves Finance Minister Kittirat Na Ranong, a non-party financial market technocrat, in place despite an outcry over his admission in August that he told "white lies" about export prospects.
The reshuffle - Yingluck's third since she came to power 15 months ago - comes ahead of a censure debate next month that the opposition says will target her handling of floods in 2011 and a widely criticized rice intervention scheme.
Thaksin loyalists in the cabinet include Varathep Rattanakorn, a former deputy finance minister who has been given a post in the prime minister's office, and Education Minister Pongthep Thepkanchana, a former Thaksin spokesman.
Others with close ties to Thaksin include Energy Minister Pongsak Raktapongpaisal, a veteran of the Thai Rak Thai party who is said to be close to Thaksin's other sister, Yaowapha Wongsawat.
Thaksin's brother-in-law, Priewpan Damapong, until recently national police chief, is widely expected to be given some sort of government position soon.
Analysts say the Shinawatras are surrounding themselves with seasoned political allies to help ensure the ruling party's longevity and prepare for Thaksin's return.
The placements are not just in the government.
The new Bangkok Metropolitan Police Chief is Khamronwit Thoopkrachang. In his office is a picture of himself beside former policeman Thaksin with the words: "I would not be where I am today without you, older brother".
Thaksin's nephew, Sarawut Shinawatra, has been promoted to the post of Army Commander in Bangkok's Don Muang district.
But the Shinawatras have largely left the military untouched in an unspoken truce that has allowed the other changes to go ahead, analysts say.
"If they go too far, with a systematic promotion and replacement of his opponents, then a backlash like in 2006 is possible," said Thitinan Pongsudhirak, a political analyst at Chulalongkorn University, referring to Thaksin's ouster in a coup.
(Additional reporting by Pracha Hariraksapitak; Editing by Alan Raybould and Robert Birsel)