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MOSCOW (Reuters) - Russian President Vladimir Putin publicly dismissed his defense minister on Tuesday after a multi-million dollar corruption scandal and appointed a longtime ally to oversee military reforms.
Putin announced on television that he had fired Anatoly Serdyukov, who had become a liability due to an investigation into the sale of ministry assets at suspiciously low prices.
Serdyukov's replacement in a job which had been long eyed by rivals, former emergencies minister Sergei Shoigu, is untainted by corruption and popular among Russians. Shoigu has also proved immensely loyal and shown few signs of political ambitions in nearly two decades in senior posts.
Putin's announcement made at a meeting with Shoigu appeared designed to show he will crack down on high-level corruption in his new, six-year presidential term.
"Taking into consideration the situation around the Defense Ministry, in order to create conditions for an objective investigation into all matters, I have decided to free Defense Minister Serdyukov of his post," Putin said, sitting across the table from Shoigu at a state residence outside Moscow.
The defense minister wields immense power in Russia, channeling billions of dollars every year through the country's powerful defense industry, the second largest arms exporter in the world. Putin has promised to spend 23 trillion roubles ($726.30 billion) on the military by the end of the decade.
Putin said at the televised meeting that the new minister must continue "grandiose plans for the reform of the army".
Russian investigators raided the offices of Defense Ministry firm Oboronservis last month and opened an investigation into the company on suspicion that it had sold assets to commercial firms at a loss of nearly $100 million.
The investigation also raised questions about Serdyukov's relationship with a former top female military bureaucrat, whose apartment was found to contain dozens of expensive paintings, rare antiques and more than 100 valuable rings.
A Russian tabloid newspaper with connections with the country's security personnel reported that Serdyukov was in the apartment as well when the raid began.
A one-time furniture salesman, Serdyukov owed much of his career to the influence of his father-in-law Viktor Zubkov, a former prime minister and trusted associate of Putin.
Serdyukov's control over Russia's arms budget had earned him enemies among ambitious Kremlin figures, including Deputy Prime Minister Dmitry Rogozin who oversees the country's defense industry, government sources say.
His military reforms, which reorganized troops, cut the number of officers by more than 100,000 and exposed high level corruption, also made him disliked in the ranks.
However, his alleged role in helping to dismantle the assets of jailed former oil tycoon Mikhail Khodorkovsky while he still worked in the tax office had led many analysts to believe Serdyukov was untouchable and would weather the scandal.
Shoigu, 57, an army general, was emergencies minister from 1994 until this year, when he became governor of the Moscow region.
Although the Russian authorities were criticized in 2010 over forest fires that caused Moscow to suffer for weeks under smoke and toxic fumes, his loyalty to Putin and a background untainted by corruption have stood him in good stead.
"Shoigu is unknown in our country as a great strategist or as a powerful military officer, but that is not needed in the post of the minister of defense," said Alexei Arbatov, a military analyst at the Russian Academy of Sciences.
"If the defense minister is largely an administrative post, then Shoigu has very great merits ... As an administrator he is already regarded very highly and moreover, he is popular in Russia and in social opinion," he said.
When he was serving as emergencies minister he was the most highly regarded minister by Moscow-based pollster VTsIOM.
Additional reporting by Lidia Kelly and Maria Tsvetkova; editing by Timothy Heritage and David Stamp