Putin's reason for the reshuffle became clear only a few months later, when he took down his rival, Yukos oligarch Mikhail Khodorkovsky. Formally, Yukos was destroyed with tax evasion charges; that explains why Putin needed to bring the Tax Police under his control, as it had surely been infiltrated by Yukos. With a new 40,000-strong, heavily armed agency under the control of Putin's ally Cherkesov, Putin had two insurmountable weapons to deploy against the increasingly powerful Khodorkovsky--the Anti-Narcotics Agency, and the FSB, which was (and is) also headed by another St. Petersburg ally of Putin's, Nikolai Patrushev.
Khodorkovsky was destroyed, but a new Monster was born, Putin's Monster: the all-powerful siloviki. They now provided Putin with the stability and control he needed to run the country. But there was no one to check their power--except each other.
The ostensible spark for the Spooks' War today is the strange and nasty criminal investigation into a furniture front company called Tri Kita. It's a paranoiac's dream, involving corruption at the very highest levels of the FSB, money laundering, weapons smuggling, and several high-profile hits (including the poisoning of Duma deputy and Novaya Gazeta reporter Yuri Shchekochikhin, whom I used to interview for his enlightened anti-drug-war views in the late 1990s). Cherkesov's Anti-Narcotics Agency was given the job of investigating the Tri Kita case; the suspects and their patrons are the FSB, right up to the top level. Perhaps most incredible has been Putin's own inability to get the Tri Kita investigation under control; over the course of his presidency, he's had to intervene several times to keep the case alive. At one point he complained that Moscow was too corrupt, so he moved the investigation to the Leningradskaya Oblast.
In Putin's first term, the investigation into the Tri Kita scandal resulted in a handful of corpses, a few high-level firings, and a quashed investigation. In the early part of this decade, the Tri Kita scandal was thought by many to be a proxy war between the remnants of the Yeltsin Family clan, and the rising silovik clan.
In 2006, Putin revived the Tri Kita case in earnest and realigned the balance of silovik-clan power. Perhaps Putin sensed that one silovik clan was getting too powerful, or perhaps he was acting on bugged conversations between Sechin and his ally, the powerful Prosecutor General Vladimir Ustinov, which Cherkesov's people had allegedly recorded and handed to Putin. Ustinov was forced to resign, Sechin was brought down a notch, and while Patrushev was on summer vacation, his FSB and his allies in the Kremlin and the Interior Ministry were gutted by a slew of firings and reassignments. The purge took place shortly after Ustinov's son married Sechin's daughter, sealing what was thought to be an invincible alliance. You gotta assume that the firings and humiliations didn't go down too well with the FSB-1 clan. And it was bound to haunt both Cherkesov's clan, and Putin himself.
That was last year. Cut to 2007: it's the end of the Putin Era as we know it, and Cherkessov and his clan are feeling a little too fine. At the end of August, a key member of the Cherkesov clan, Vladimir Barsukov, is arrested in Petersburg. Barsukov reportedly headed the Tambov grupperovka which essentially controlled Petersburg in the 1990s. Russians will tell you that the story of Putin's ties to the Tambov grupperovka in the 90s is one of those stories that you just don't dare touch. When Putin assumed the presidency, most of the Tambov gang members were quietly eliminated in a kind of end-of-The-Godfather bloodbath, only without the opera soundtrack. Barsukov survived it and went legit. He is said to be close to the head of Putin's presidential security, Viktor Zolotov, who once protected Putin's mentor, former Petersburg mayor Anatoly Sobchak--yes, the same Sobchak who fertilized Ksenia Sobchak.