Russian President Vladimir Putin has publicly dismissed his defence minister after a multi-million dollar corruption scandal and appointed a long-time ally to oversee military reforms.

Mr Putin announced on television that he had fired Anatoly Serdyukov.

Mr Serdyukov had come to be regarded as a liability due to an investigation into the sale of ministry assets at suspiciously low prices.

A heady mix of sex, power struggles and military vendettas dominated talk in Russia about what was really behind the downfall of the man who has overseen the nation's most radical defense reform in decades.

The dismissal of Anatoly Serdyukov was a surprise.

The burly politician was widely regarded as having the president's blessing for a military modernisation that has won the enmity of generals and arms makers with connections to members of Putin's inner circle.

Adding intrigue was the fact that Mr Serdyukov is married to the daughter one of President Putin's close allies, a former prime minister who wields enormous influence as chairman of state-run natural gas giant Gazprom.

Media reports suggest that Mr Serdyukov's alleged philandering angered Viktor Zubkov and may have been a factor in the sacking.

But most experts see a behind-the-scenes power struggle at the root of Putin's decision.

Mr Serdyukov has masterminded a campaign to drastically cut the ranks of officers and overhaul an antiquated military structure to create a leaner, meaner force that might restore Russia's faded military glory.

In particular, he has aggressively demanded higher quality and cheaper prices from the military industry -- ruffling powerful business interests.

That is seen as having set off an internal struggle in which Kremlin allies of leading arms makers have conspired to bring Mr Serdyukov down.

Mr Serdyukov, a former furniture salesman, entered public service as a tax official and quickly rose through the ranks to become head of the Russian tax service before being appointed defense minister in 2007.

Russian media have speculated that he owed his meteoric rise to marrying Mr Zubkov's daughter.

Whatever the origins of Mr Serdyukov's success, it's clear that he made a profound impact on Russia as its military chief.

Mr Serdyukov's reform led to the dismissal of 200,000 officers, disbanded nine out of ten military units and turned over once untouchable military assets to civilian hands.

Under Mr Serdyukov, the military purchased amphibious assault vessels from France, bought Israeli drones, Italian armoured vehicles and other foreign weapons in an unprecedented slap in the face of the Russian military industrial complex.

He said that a battle for the distribution of €495bn that the Kremlin plans to spend on buying new weapons through 2020 was likely a key reason behind Mr Serdyukov's firing.

Speculation about Mr Serdyukov's possible downfall has floated around for years, but he had received Putin's staunch backing until now.

President Putin authorised and publicly praised Mr Serdyukov's reforms, and some observers expect that they will continue, although perhaps at a slower pace, under his successor.

Mr Serdyukov's replacement in a job which had been long eyed by rivals, former emergencies minister Sergei Shoigu, is untainted by corruption and regarded as popular among Russians.

Mr Shoigu has also proved immensely loyal and shown few signs of political ambitions in nearly two decades in senior posts.

Mr Putin's announcement made at a meeting with Mr Shoigu appeared designed to show he will crack down on high-level corruption in his new, six-year presidential term.

The defence minister wields immense power in Russia, channeling billions of euro every year through the country's powerful defence industry, the second largest arms exporter in the world.

Mr Putin has promised to spend €560bn on the military by the end of the decade.