Sheikh Jaber, who had ruled since 1977, died after a long illness and the country's ailing crown prince is set to take over as ruler of this major Gulf oil producer.

Analysts said they expect the new emir to maintain Kuwait's oil policies and pro-Western outlook.

Sheikh Jaber suffered a brain haemorrhage in 2001, which limited his duties in the country which controls about 10 percent of known global oil reserves.

Crown Prince Sheikh Saad al-Abdulla al-Sabah, 76, is likely to be a figurehead while Prime Minister Sheikh Sabah al-Ahmad al-Sabah runs the country -- a role he has played over the past four years.

Sheikh Jaber fled to Saudi Arabia in 1990 when Saddam's troops invaded but returned after the occupation ended to lead the rebuilding of a land scarred by killing, torture and brutal Iraqi rule. He also oversaw the rehabilitation of oilfields set on fire by retreating Iraqi troops.

US-led forces used Kuwait as its main staging ground for the 2003 invasion of Iraq that toppled Saddam. Kuwait hosts up to 30,000 US troops and is home to some 13,000 US citizens.

State television said the emir had "passed away at dawn on Sunday." Hundreds of Kuwaitis and expatriates, some sobbing and reading the Koran, gathered outside the emir's Dasman palace in Kuwait City.

"Our kindhearted father is gone, he never held back on giving us everything we needed," said Raggiyah al-Qallaf, 40, as she cried, clutching a copy of the Koran.

"This is the only emir I have known since my birth, he has been helpful to orphans like me; he was the one who looked after us and today he is dead; that's why I am crying," law student Fahd al-Ajmi, 23, told Reuters.

The ill health of Sheikh Jaber and Sheikh Saad caused concern at home and abroad over the future leadership of one of OPEC's biggest producers.

Calls by parliamentarians and members of the opposition for the Kuwaiti government to replace the crown prince and to share power have also clouded the succession process.

There has been no official word on who will take over but the ruling family is likely to adhere to the constitution and appoint Sheikh Saad, even though he is largely incapacitated.

"I don't think there will be any change. I expect the crown prince to take power officially but Prime Minister Sheikh Sabah will have the real power," one Western diplomat told Reuters.

"Most likely the prime minister will be named the crown prince. I don't think he will make any changes in policy."

Kuwaiti oil officials also said on Sunday the country would stick to its policy of keeping global markets well supplied.

"Kuwait's (oil) policy will not change," an official, who declined to be named, told Reuters by telephone. "The oil sector is running as normal, both production and exports."

Kuwait pumps at around 2.68 million barrels per day (bpd).

Condolences poured in from several Arab leaders. There were no immediate details about Sheikh Jaber's funeral but Muslim tradition calls for the dead to be buried as soon as possible.

Kuwait declared a 40-day period of mourning and government offices, banks and the stock market would close for three days.

The emir was the 13th ruler of a dynasty that has ruled Kuwait for more than two centuries. The Anaiza tribe, to which the al-Sabahs belong, migrated from the Arabian hinterland.

The succession process alternates between the two branches of the ruling family -- al-Jabers and al-Salems.

The ruling family has come under pressure from both Islamists and pro-Western liberals to loosen its grip on the government and share power.

Kuwait has cracked down on Islamists opposed to the US military presence in the country, though diplomats say radical Islam is taking hold among Kuwaiti youth.

In December, a Kuwaiti court sentenced to death six suspected militants linked to Osama bin Laden's al Qaeda for bloody attacks in the country.

President, PM condole death
UNB reports: President Iajuddin Ahmed and Prime Minister Khaleda Zia yesterday expressed their deep shock at the death of Kuwait Emir Sheikh Jaber Al-Sabah.

In a message to Crown Prince of Kuwait Sheikh Saad Al-Sabah, Iajuddin conveyed deepest condolences on behalf of the government and the people of Bangladesh.

"The late emir was a great leader of the Kuwaiti people as well as of the Islamic Ummah, Bangladesh lost a close and trusted friend," he said. He also prayed to almighty Allah to grant the bereaved family and the people of Kuwait fortitude to bear this irreparable loss.

Prime Minister Khaleda Zia in a condolence message also expressed extreme shock at the sad demise of the emir.

She said the death of the emir "is an irreparable loss both to Kuwait and to the Muslim Ummah." His service to the Muslim world will be remembered, she added, terming the late leader a true friend of Bangladesh.

Iajuddin and Khaleda said the government and the people of Bangladesh join the Kuwaiti people in mourning. They also prayed for eternal peace of the emir's departed soul.