BANGKOK - A Thai court Tuesday rejected a U.S. request to extradite an alleged Russian arms smuggler dubbed the "Merchant of Death," dealing a setback to American efforts to try him on charges of plotting to supply weapons to Colombian rebels.

Viktor Bout, 42, was arrested in March 2008 at a luxury hotel in Bangkok as part of an elaborate sting in which U.S. agents posed as arms buyers for the Revolutionary Armed Forces of Colombia, or FARC, which Washington classifies as a terrorist organization. He is being held in a Bangkok prison, but could be set free if no appeal is filed.

"We will not extradite him to the United States," said Judge Chittakorn Pattanasiri, of the Bangkok Criminal Court.

Chittakorn said the court rejected the extradition request because Bout had not been accused of committing any crimes against Thailand, which has not listed FARC as a terrorist group.

Latin America's last major rebel army, the FARC has been trying to overthrow successive Colombian governments for a half-century. It has been put on the defensive in recent years by Colombia's U.S.-backed military and has lost support amid reports that it is funded by drug traffickers and as it continues to hold dozens of hostages in the jungle.

Bout, dressed in an orange prison uniform, jumped up from his seat and hugged his crying wife as the ruling was read out. He then flashed a victory sign to TV cameras as he was led out of the courtroom.

The judge said Thai prosecutors have 72 hours to indicate whether they will appeal the ruling, and, if not, Bout will be set free.

If an appeal is filed, Bout will be held pending further proceedings.

U.S. Embassy deputy chief of mission James F. Entwistle said Thai prosecutors have said they will appeal the case and that Washington supports that.

"We're disappointed and mystified by this lower court ruling," Entwistle said. "We think the facts, relevant Thai law, and the terms of the bilateral extradition treaty clearly supports the extradition of Viktor Bout to the United States to stand trial on serious terrorism charges."

Russian Embassy official Andrey V. Dvornikov said Moscow was "satisfied" with the court's decision but that Bout was not yet free.

"This case will be over when Mr. Bout is home," he said.

Bout has been linked to some of the world's most notorious conflicts, allegedly supplying arms to former Liberian dictator Charles Taylor and Libyan leader Moammar Gadhafi. He has repeatedly denied the accusations.

The U.S. is seeking Bout's extradition on charges he conspired to sell millions of dollars worth of weapons to FARC, including more than 700 surface-to-air missiles, thousands of guns, high-tech helicopters and airplanes outfitted with grenade launchers and missiles. He has been indicted on four terrorism-related charges in New York and could face life in prison.

Bout's wife Alla told the Russian news agency ITAR-Tass on Monday that she was hopeful her husband would be released, saying prosecutors had offered no evidence of his guilt.

"If the court is impartial and turns an attentive ear to the defence, there will be no extradition," she said. "If the U.S. request is sustained, we shall file an appeal."

Hearings on his extradition began in June 2008 and have been delayed by absent witnesses and sick defence attorneys.

Bout claimed in court that he ran a legitimate air cargo business and was in Bangkok to discuss selling airplanes to Thai businessmen.

Bout, a beefy, former Soviet air force officer, has denied any involvement in illicit activities and has never been tried, although he has been the subject of U.N. sanctions, a Belgian money-laundering indictment and an assets freeze by the U.S.

His nickname, the "Merchant of Death," came in 2000 from a minister at Britain's Foreign Office, Peter Hain, who was concerned about Bout allegedly ferrying weapons around Africa. The name was adopted for the title of a 2007 book about the Russian by two U.S. journalists. Bout is also widely believed to be a model for the arms dealer portrayed by Nicholas Cage in the 2005 movie "Lord of War."

Bout had called the Thai hearing "theatre." He said he was the victim of an American frame-up and that the United States had pressured the Thais to rule in their favour. American lawmakers in turn have accused Russia of trying to derail the hearing so that Bout can return home.

In the court's final hearing in May, a Thai Foreign Ministry official concluded the extradition request met the conditions of the Thai-American extradition treaty.