A 70-year-old Austrian, accused of spying for Russia, is under investigation on suspicion of "betraying state secrets" and "intentionally revealing military intelligence", and has been ordered to surrender his passport and report daily to the police

An Austrian court on Tuesday released from custody a former colonel suspected of spying for Russia, but placed him under judicial supervision, it said.

The case has soured relations between Moscow and one of its few European allies since it came to light last week.

The 70-year-old suspect, who is under investigation on suspicion of "betraying state secrets" and "intentionally revealing military intelligence", has been ordered to surrender his passport and report daily to the local police, the court in Salzburg said.

Prosecutors had requested he continue to be held in custody because of the flight risk, but the court rejected the application.

Prosecutors said they would appeal the court's decision, citing the "intense" risk of the suspect absconding or re-offending.

The former army officer, who retired five years ago, is suspected of working for the Russian secret service between 1992 and September 2018 and faces up to 10 years in prison if found guilty.

The suspect, whose identity has not been made public, has signalled his willingness to cooperate with the investigation.

According to Austrian media reports, the suspect worked in the planning services of the defence ministry and took part in NATO seminars.

While Austria is neutral and not a member of NATO, it regularly collaborates with the alliance.

According to the daily Salzburger Nachrichten, the suspect -- described as a mid-ranking officer -- passed on general information about the ministry, as well as information about "the weaknesses and dietary preferences" of his colleagues.

He reportedly received around 300,000 euros ($340,000) in all for such information.

Austrian Chancellor Sebastian Kurz announced Friday that a probe had been launched into the affair, which has cast a shadow on previously cordial relations between Vienna and Moscow.

Austrian Foreign Minister Karin Kneissl, who had invited Russian President Vladimir Putin to her wedding in August, has cancelled a planned trip to Moscow at the beginning of December.

The Kremlin, for its part, has expressed displeasure at Austria's decision to go public with the affair.

Nevertheless, Austrian President Alexander Van der Bellen said Monday that the matter was unlikely to harm relations between the two countries on a lasting basis, noting that "all secret services around the world" practice this sort of espionage.

The Austrian government is currently on the defensive after its interior minister Herbert Kickl controversially ordered a raid of the headquarters of its BVT secret service at the beginning of the year.

Kickl is a member of the far-right Freedom Party, which has links with Putin.

Austria's head of public security, Michaela Kardeis, acknowledged in early November that a BVT employee has been under investigation for the past year on suspicion of espionage, without revealing further details.

According to media reports, Russia is involved in this case, too, causing Austria to pull out temporarily from the so-called Bern Club, a meeting forum for European secret services. Austria has since rejoined the forum, Kardeis said.

A 70-year-old Austrian, accused of spying for Russia, is under investigation on suspicion of "betraying state secrets" and "intentionally revealing military intelligence", and has been ordered to surrender his passport and report daily to the police