Anatoly Serdyukov has been replaced
with a former emergencies minister and loyal ally of Mr Putin, Sergei Shoigu.
Russia's top investigative agency is
investigating the sale of ministry assets at prices below market value.
Mr Putin said he had removed Mr
Serdyukov to create "conditions for an objective investigation".
Last month, Russian investigators
raided the offices of a state-controlled military contractor and began
investigating the company amid claims that it had sold assets to commercial
firms at a loss of nearly 3bn roubles ($100m; £62.5m).
It is one of Vladimir Putin's
principles of power: if you're inside his inner circle and stay loyal, he'll
remain loyal to you.
Which is why the president's
decision to sack his defence minister is so extraordinary.
True, Anatoly Serdyukov had been
under pressure. There is speculation in the Russian media that Mr Serdyukov had
been in a relationship with one of the key suspects in the fraud case
-allegations which seem designed to smear the now former defence minister.
Perhaps more crucially, his
programme for modernising Russia's armed forces by cutting jobs had met strong
opposition within the military and outside it.
The head of the Russian parliament's
defence committee could barely conceal his joy at news of the sacking.
Growing discontent in the army would
have been a major concern for President Putin.
Or did Mr Putin fire the minister to
send a signal the Kremlin is serious about battling corruption? In the
byzantine world of Russian politics, it is difficult to say. But one thing is
certain: for Vladimir Putin, sacking a loyal minister is out of character.
Oboronservice's activities include
servicing military aircraft and arms and constructing military facilities.
Investigative Committee spokesman
Vladimir Markin said Mr Serdyukov would be questioned in the probe "if
there is a reason" for doing so.
Mr Serdyukov was a furniture store
executive and head of the Russian tax service before being appointed defence
minister in 2007.
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