Russian President Vladimir Putin has dismissed his close ally and powerful chief of staff Sergei Ivanov, according to a Kremlin statement.

The move represents the highest-level demotion inside the Kremlin in several years.

"Russian President Vladimir Putin has decreed to relieve Ivanov of his duties as head of the Russian presidential administration," Friday's statement said.

Ivanov, 63, who is also a former defence minister and also served together with Putin in the Soviet-era KGB spy agency, would now take up the post as a special representative for conservation, environmental and transportation issues.

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He was appointed Kremlin chief of staff in late 2011, only months before Putin's 2012 re-election.

Ivanov will be replaced by Anton Vaino, a 44-year-old former diplomat who had served as Ivanov's deputy since 2012, according to a decree signed by Putin on Friday.

"I remember well our agreement about the fact you had asked not to be in this area of work as the head of the presidential administration for more than four years," Putin said in a meeting with Ivanov and Vaino broadcast on state television.

"This is why I am sympathetic to your desire to move on to another field of work."

Putin ally

Al Jazeera's Rory Challands, reporting from Murmansk in northwest Russia, said that Ivanov was a "one of the brightest stars" in Russian political life and one of Putin's longest-standing allies, as well as the longest-serving chief of staff in the country's modern history.

Ivanov's removal was deeply significant, Challands said, even though the exact reason for that decision was difficult to decipher.

"That's because the circle of trust around Putin is so small, and getting smaller.

"This kind of information is only really shared by the tightest people in that group. So maybe only Putin and Ivanov themselves know why he has gone."

Sergey Markov, public spokesman for Putin, said that Ivanov resigned of his own accord for health reasons, and the president wanted to "refresh his power structure".

"I think this refreshing of his power structure could ... coincide with his now stronger Russian position on the Ukrainian government, which Putin now directly accuses of using terrorist methods," he said.

Many observers had considered Ivanov a leading candidate to take over from Putin as president when his second term ended in 2008.

However, Putin handed over the top job to Dmitry Medvedev, the current prime minister, before reclaiming it in 2012.

"Ivanov has been in every single Putin administration for tens of years. You don't fire a guy like that on any given day without a major reason," Fred Weir, Russia correspondent for the Christian Science Monitor, told Al Jazeera from Moscow.

"But we have no idea what that is," he said.

Source: Al Jazeera and agencies