Prince Bandar bin Sultan's departure as head of Saudi intelligence, confirmed this week, marks the end of an era for a flamboyant and powerful character on the Middle Eastern stage. The big question is whether it signals a meaningful shift in the kingdom's policy towards Syria and its commitment to the overthrow of President Bashar al-Assad.

Bandar – known as "Bandar Bush" from his 22 years as Saudi ambassador to the US – is a legendary networker and hawk. The Saudi press agency said he stepped down at his own request. (It did not say whether he would continue as head of the national security council, a less important position.) He will be replaced by his deputy at the Saudi equivalent of the CIA, Youssef bin Ali al-Idrisi, who is not a royal and therefore far less powerful.

For the past 18 months Bandar had led Saudi efforts to better co-ordinate the supply of weapons to Syrian rebels fighting Assad. But he faced criticism for backing extreme Islamist groups and thus risking a repeat of the "blowback" that brought Osama bin Laden's Saudi fighters home after the officially sanctioned jihad against the Soviets in Afghanistan in the 1980s.

Bandar's departure is not a complete surprise. Amid unprecedented tensions in relations between Riyadh and Washington, there had been signs he had fallen from favour and had in effect already been sidelined on Syria.

"Bandar's approach was very black and white," said one well placed observer. "And he seems to have over-promised to the king in terms of confidently predicting Assad's departure."

He was often abroad, reportedly being treated for health problems, or "unavailable" at home due to illness. He is also known to suffer badly from depression. Several months ago he failed to turn up for an urgently-scheduled meeting on Syria with David Cameron at Chequers.

According to sources in Riyadh, Bandar faced strong opposition from the powerful interior minister (and possible future king), Prince Mohammed bin Nayef, who led the crackdown on al-Qaida following a wave of attacks between 2003 and 2006. Bin Nayef became increasingly concerned about battle-hardened young Saudis returning home radicalised after fighting in Syria. Bandar's removal probably reflects that policy divergence, western diplomats and Saudis say.

Bandar has irritated the Americans with outspoken criticism of Barack Obama's failure to punish Syria following the chemical weapons attack near Damascus last August. After that he talked of limiting interaction with the US in protest at its policies on Syria, Israel and especially the beginning of rapprochement with Iran – the latter an unchanging bogeyman and regional and sectarian rival for the Saudi prince. Bandar was also said by a senior Arab figure to have angrily threatened the emir of Qatar, which upstaged its larger neighbour in backing anti-Assad forces. His departure may help heal the rift between the US and the kingdom following last month's meeting between Obama and Abdullah. That, in turn, could impact on Saudi policy towards Syria.

Bandar, a former fighter pilot, is King Abdullah's nephew. He was close to presidents Reagan and both Bushes. He negotiated huge arms deals for the kingdom – including the infamous £43bn al-Yamamah agreement with the UK. The Guardian reported allegations that he had received £1bn in secret payments from BAE.

Known for his showy lifestyle – he has a penchant for cigars and flies in a private Airbus – he has kept a low profile since returning from the US to Riyadh in 2005. He became head of intelligence in July 2012. Apart from the Syria file, he was also closely involved in Saudi support for Egypt's military rulers after they ousted the Muslim Brotherhood president Mohamed Morsi.

Saudi-watchers say decision-making in Riyadh is in poor shape. King Abdullah is 90 and frail, Crown Prince Salman is 78. Last month the appointment of a new deputy crown prince, Muqrin, a relative youngster at 68, again focused attention on the succession.

"The looming transition in Saudi leadership … may contribute to the uncertainty and opacity of the kingdom's foreign policy-making," said Yezid Sayigh, of the Carnegie Foundation. "Already highly personalised, decision-making may become further dispersed as multiple centres of princely power prepare to compete over the succession from King Abdullah."