The power struggle within Burma's military appears to have come to a head with the removal of Gen Khin Nyunt as the country's prime minister and military intelligence chief.
He has been replaced by Gen Myint Swe, currently Rangoon regional commander, according to Asian diplomats in the Burmese capital.
It appeared he was under house arrest. Eyewitnesses told the Bangkok Post that soldiers were guarding Khin Nyunt's Rangoon residence and were also posted outside the homes of his son and other immediate family members.
Thai military intelligence sources believe he was detained at the Mandalay airport on his way back to the capital on Monday evening. The military intelligence headquarters Rangoon was raided by army officers and military guards are still in place around the compound.
''It certainly seems to be a palace coup,'' said a Rangoon-based Asian diplomat. But so far details of the purge are sketchy. In the past 24 hours several junior military intelligence officers have been detained in a series of sweeps in Rangoon and around the border areas, especially with China.
On the face of it, this is a crackdown on corruption. Many of these intelligence officers are heavily involved in business activities. Last month the army, on orders from General Maung Aye, the army chief, arrested more than 20 intelligence officers in the border town of Muse on the Chinese border. The military intelligence compound was surrounded and two officers arrested for corruption. Both had illegal bank accounts in China.
But it was also a way of clipping Khin Nyunt's wings. For months now, Than Shwe has been systematically reducing Khin Nyunt's power. The intelligence chief has never been very popular within the army. It was military intelligence which provided him with his main power base. Without it he has no real military or political influence.
Over the past few years it has been clear that there was a growing division within Burma's military leadership on how to maintain the army's political role in the future and develop the country.
It has largely been a rift between the pragmatists around Khin Nyunt, who believe that only by introducing some form of political and economic reform can the military preserve its position in the long run, and the hardliners _ Than Shwe and his supporters _ who believe that making any concession is a sign of weakness that would erode their position.
But more importantly, the pragmatists, including the prime minister, understood the critical need for political and economic reform in Burma. Khin Nyunt has frequently told Asian leaders and the UN envoy Razali Ismail that he supported involving Aung San Suu Kyi in the national reconciliation process and engaging in a dialogue with the international community.
''It's the start of Burma's night of the long knives,'' said a Western diplomat in Rangoon.
Than Shwe has begun one of the most extensive shake-ups within Burma's military government since the army seized power 16 years ago. The first step was sacking the foreign minister Win Aung and the deputy foreign minister Khin Maung Win in a major cabinet reshuffle nearly a month ago. This was aimed at reducing Khin Nyunt's influence on foreign policy.
More significant changes are in the pipeline, Burmese military sources recently told the Bangkok Post. More cabinet changes are likely in the near future. Regional commanders are expected to be changed, as are officers in the ruling military State Peace and Development Council. Military intelligence was also expected to be targeted.
Asian governments are worried about the implications of Than Shwe's coup; though few are prepared to make any public comment, merely insisting, as Thailand's Prime Minister Thaksin Shinawtra did, that it was an internal matter for Burma.
China will certainly be unhappy. They have been strong supporters of Khin Nyunt and had pinned their hopes on him being able to introduce economic reform.
The future of Burma's national reconciliation process has also been thrown into doubt. The National Convention, which was drawing up a new constitution, was expected to resume deliberations in November after the rainy season.
Although opposition leader Aung San Suu Kyi's National League for Democracy was barred, the various ethnic rebel groups who have signed ceasefire agreements with Rangoon have been attending. But with Khin Nyunt's future role in doubt, their participation is far from guaranteed.
Many ethnic leaders are personally loyal to Khin Nyunt and do not trust Than Shwe or Gen Maung Aye. The Wa and Kachin ethnic leaders are currently very anxious and uneasy, according to sources close to both groups, and are nervously waiting to hear what has become of the prime minister.
''This may be the final straw that convinces us to pull out of the National Convention,'' a senior ethnic leader in Burma told the Bangkok Post on condition of anonymity.
What is now more clear is that Burma's military leaders have no intention of handing power to a civilian government in the near future. Gen Than Shwe has made no secret of his intention to remain in control for at least another decade and will continue to remove any rivals within the army he fears may threaten to his ambition.