In a further major government reshuffle, Vladimir Putin also appointed a new defense minister, moved the chief of the government staff to the post of deputy prime minister, transferred the Chechen president to the federal government and appointed Ramzan Kadyrov, a young Kremlin-backed Chechen politician, as acting president of the troubled republic.
Ivanov, 54, a former KGB officer like Putin, will now enjoy equal authority with the other first deputy prime minister and potential presidential successor, Dmitry Medvedev, who is currently in charge of national welfare projects in the government.
At an economic conference in the Kremlin, the president, whose second consecutive term ends in March 2008, said the reshuffles would allow Ivanov to expand his activities from the defense sector to partially include the civilian economy as well.
"In these circumstances, he will be unable to continue heading the Defense Ministry," Putin said but added that Ivanov should also keep in mind the interests of the Defense Ministry.
The president praised Ivanov's efforts in his role as defense minister, and said he hoped the new first deputy prime minister would apply his positive experience in the defense sector to civilian sectors.
"Positive trends in the defense sector have emerged, as can be seen by the growing exports of Russian weapons, which reached a record high of $6 billion last year," Putin said.
The president also said it was important to proceed with the Armed Forces' development and rearmament program until 2012-15. "A great deal has been done, and now it remains to complete the task," Putin said.
Addressing a Defense Ministry board session Thursday, Putin said the role of the Russian General Staff would also be steadily enhanced.
"The role of the military component, of the General Staff, will certainly become even greater than it is now," the president said.
The chief of Russia's General Staff, Gen. Yury Baluyevsky, said Thursday that Moscow might unilaterally withdraw from the agreement between Russia and the United States on the elimination of intermediate-range and shorter-range missiles, or INF Treaty, signed in 1987.
The announcement came as a strong warning to the U.S., which has unveiled plans to deploy elements of its anti-missile defense system in Poland and the Czech Republic.
According to the presidential decree, Ivanov will be replaced in the post of defense minister by Anatoly Serdyukov, 45, who headed the Federal Tax Service for the past three years. He will be the second civilian defense minister in Russia after Ivanov.
"I certainly hope that the ministry, at least the part of it that deals with development, will pay close attention to the economic and financial components [of defense activities]," Putin said.
The president also appointed the former government chief of staff, Sergei Naryshkin, as a deputy prime minister responsible for foreign trade, including with the former Soviet republics.
Naryshkin, 52, worked in the mayor's office of St. Petersburg in the early 1990s under Putin, who was then deputy mayor of Russia's second city.
In 1998, Naryshkin was appointed the head of the Leningrad regional government committee on foreign economic and international ties, and in 2004 he was appointed a deputy head of the Russian president's economic department, later becoming a deputy head of the Russian government staff and eventually chief of staff.
The president said Prime Minister Mikhail Fradkov had repeatedly raised the issue of long overdue changes in the government structure. Earlier this month, however, Putin told the premier that government reform should not be rushed.
Russian media said then that government reform might above all be targeted at the Ministry of Economic Development and Trade, the Ministry of Industry and Energy, and the Social Development and Health Ministry.
Naryshkin's appointment might be a bad sign for German Gref, the liberal minister of economic development and trade and a long-time opponent of Prime Minister Fradkov, because the new vice premier could relieve Gref of some of his functions.
The presidential reshuffle Thursday also concerned the leadership of Russia's troubled republic of Chechnya in the North Caucasus.
Putin transferred now former Chechen President Alu Alkhanov to the post of a deputy justice minister in the federal government, allegedly at the request of Alkhanov himself.
Alkhanov, whose term was to end in 2008, became Chechen president in August 2004 in an election in which he was the only contestant backed by the Kremlin. He was tapped to fill the position left empty by the assassination of his influential predecessor, Akhmad Kadyrov, May 9, 2004.
Kadyrov's son, Ramzan, who had been in charge of his father's security, was very popular with the Chechen people and seemed the most likely successor to his father. But under the Chechen Constitution, he could not take the position until he reached the age of 30.
He was, therefore, appointed Chechnya's first deputy prime minister, and promoted to the post of advisor to Putin's envoy in the southern Federal district several months later. In November 2005, the younger Kadyrov became acting prime minister and later prime minister of his home republic.
Putin has now appointed Kadyrov, who turned 30 last October, acting president of Chechnya.