Smith refused permission to talk to Rangers
Rangers will have to pay compensation to the Scottish Football Association if Walter Smith is to return to Ibrox as manager for the second time.
The Scotland boss was refused permission to speak to the Govan club after a meeting with the SFA at Hampden this morning.
Smith and Ally McCoist were widely tipped to take over at Ibrox following the departure of Paul Le Guen last week.
But after the former Everton boss met with a four-man SFA board at the national stadium, SFA chief executive David Taylor emerged to say:
'Following contact from Rangers Football Club, we held a meeting this morning with Walter Smith.
'At this meeting Walter Smith asked to be relived of his contract as national team manager for Scotland.
'This request has been refused and Rangers Football Club have been advised accordingly.
'That is all I have to say at this stage in terms of a statement from the Scottish Football Association. I think it says it all.'
It is understood that the SFA's reaction to Rangers' bid for Smith was not unexpected by the Govan club whose disastrous season took a further turn for the worse when they were knocked out of the Tennent's Scottish Cup third round by Dunfermline on Sunday.
The Ibrox club will have to wait to see if Smith resigns, a move that will leave the Light Blues open to a compensation claim by the SFA.
Taylor, who described the hour-and-a-half meeting as 'businesslike' rather than friendly, clearly put the ball back into Rangers' court by saying:
'Walter understands the position the SFA is taking.
'He is under contract with the SFA and we have made our position clear.
'There is no action to be taken by the SFA, it is a matter for Walter or Rangers Football Club.'
Taylor admitted that McCoist, Rangers legend and current strikers' coach for Scotland, is free to do as he chooses.
He said: 'Ally is not under contract with the SFA.
'He assists on a match-by-match basis so there are no issues there.'
There were suggestions that Smith, whose first stint at Ibrox between 1991 and 1998 saw him lead the Light Blues to nine championships in a row, would consider splitting his time between Scotland and Rangers.
However, Taylor is adamant that the Scotland manager is a full-time post.
He said: 'That (possibility of a part-time manager) is not attractive to the SFA.
'We have a full-time manager. Walter is under contract to the SFA at the moment.
'If that is to change then we will be looking for a full-time manager.'
Scotland are top of their European Championship qualification section ahead of Italy and France, with a crucial double-header coming up against Georgia at home and the Italians away in March.
Taylor admits the speculation surrounding Smith's possible departure to Ibrox could not have come at a worse time for the national side.
He said: 'This is a major disruption as we go into the next stages.
'We have got ourselves into a good place and we have improved the position of the team.
'I am very disappointed.'