The news that President Putin had decided to replace Anatoly Serdyukov first came in a television broadcast. Video footage showed Putin meeting with the man who is to take over as defense minister, Sergei Shoigu, and explaining to him the reason for the decision.

"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.

Serdyukov's future as defence minister already appeared to be in doubt two weeks ago, after Russian investigators raided the offices of a defense ministry company. They are looking into allegations that the firm sold defense ministry assets, including real estate, to private companies far below market value, for an estimated loss of almost $100 million (78 million euros).

However the Interfax news agency gave a slightly different reason for the dismissal, saying it was over Serdyukov's failure to provide sufficient housing for military families.

Serdyukov is a former tax collector who became the first civilian to head Russia's defense ministry when he was appointed to the post in 2007. He had been charged with implementing major reforms to Russia's military.

Shoigu, who is one of Putin's closest friends and political allies, served as emergency situations minister from 1994 until earlier this year, when he was appointed as the governor of Moscow region.

pfd/hc (Reuters, AFP, dpa, AP)