Lindsay Murdoch, Jakarta – Indonesian army chief General Tyasno Sudarto has been replaced only weeks after court evidence implicated him in an alleged multi-million-dollar counterfeit operation to finance clandestine military operations in East Timor last year.

President Abdurrahman Wahid gave no reason for replacing General Tyasno in an imminent shake-up of the country's beleaguered security forces. He was replaced by his deputy, General Endriartono.

Witnesses told Jakarta District Court last month that $A3.8million worth of counter-feit 50,000 rupiah notes were printed by military officers on the orders of General Tyasno when he was the military intelligence chief.

Second Lieutenant Ismail Putra testified the money was to be used to support military intelligence operations in East Timor, including militia activities. "I should be rewarded, not sacrificed before the court," Ismail told the court before he was sentenced to seven years' jail on counterfeiting charges.

Ismail claimed in court that General Tyasno was acting on orders from the then armed forces commander, General Wiranto, whom Mr Wahid sacked from cabinet early this year. Serial numbers used for the counterfeit money were provided by Bank Indonesia, the court heard. The court refused to call General Wiranto or General Tyasno, who denied the allegations to Indonesian journalists. "It is an example of thief shouting thief, throwing accusations at other figures," General Tyasno said.

Tempo magazine quoted Judge Poerwanto as saying the truth of the general's involvement in the case was within the jurisdiction of the military and not the public courts.

Unconfirmed media reports in Jakarta say General Tyasno was one of 45 generals who recently signed a document opposing Mr Wahid's promotion of a reformist army officer, Lieutenant-General Agus Wirahadikusumah. General Agus was sacked as chief of the Army Strategic Reserve Command (Kostrad) in August as he pushed an investigation into allegations of corruption in the command of his predecessors.

General Tyasno and the other generals who signed the document had threatened to resign en masse if Mr Wahid appointed General Agus army chief. General Tyasno said he was summoned by Mr Wahid at the weekend and told he was losing his job.

Mr Wahid is known to be unhappy about the military's failure to end violence that continues to rock the Indonesian archipelago from Aceh in the west to the Maluku Islands in the east.

But diplomats and analysts are worried that Mr Wahid appears to be backtracking on his promise made when he took office to reform the armed forces, including winding back its role in civilian affairs.

The latest Far Eastern Economic Review magazine quotes a senior army officer, Lieutenant-General Agus Widjoyo, as saying military leaders "still have problems" absorbing the principle of civilian supremacy. "This should not be seen negatively," General Agus was quoted as saying. The resistance to civilian control, he said, "grows out of concern about the survivability of the Republic of Indonesia".