By Angus McDowall
DUBAI (Reuters) - Saudi Arabia's King Abdullah was expected to name Interior Minister Prince Nayef as his heir on Thursday, formalizing a smooth succession in the world's biggest oil producer.
Nayef has already run the kingdom on a daily basis for extended periods in recent years, during absences of both King Abdullah and Crown Prince Sultan, the heir who died on Saturday.
Given the king's age and health problems, the new crown prince is likely to assume an even more active role immediately.
An Allegiance Council of the ruling family, set up by the king in 2006, is expected to approve a new crown prince after mourning for Sultan ends on Thursday. It can step in if anything befalls the ruler before an heir is named.
"There is an institutionalized mechanism in place," said Hossein Shobokshi, a Saudi columnist. "The Crown Prince had been deteriorating for some time so they haven't been caught by surprise. It should be extremely orderly.
"We had been waiting for this development and things will be announced from a protocol point of view after the mourning period is over."
The kingdom has great influence over Sunni Muslims through its guardianship of Islam's holiest sites in Mecca and Medina. It faces insecurity from its neighbors, notably conflict-ridden Yemen, and has a major regional rival in Shi'ite Muslim Iran.
Abdullah accepted the condolences of visiting leaders from his seat at Tuesday's funeral, wearing a surgical mask barely a week after a back operation.
Among mourners who greeted him after a prayer recital was Iran's Foreign Minister Ali Akbar Salehi. A U.S. delegation led by Vice President Joe Biden is expected in Riyadh on Thursday.
Nayef was later shown on television meeting the king of Jordan and top officials from the United Arab Emirates.
Nayef, born in 1933, is sometimes described by Saudi liberals as an anti-reform conservative who is likely to take a cautious approach to social and political change, while emphasizing national security in foreign policy.
He was quoted soon after the September 11, 2001 attacks on the United States as doubting that any of his compatriots had been involved. It turned out that 15 of the 19 hijackers were Saudis.
Some diplomats and analysts say the man who has served as interior minister since 1975 may show a more pragmatic side as crown prince -- and eventually as king.
King Abdullah, may also institute a wider cabinet reshuffle.
The position of second-deputy prime minister, held by Nayef since 2009, is usually awarded to the prince who is considered third in line to the throne.
Although the king does not have to name anyone to the role, and did not appoint Nayef as second-deputy until four years after he became king, it might be seen as an important failsafe given Abdullah's and Nayef's ages.
Riyadh Governor Prince Salman, a younger full brother of Sultan and Nayef, is widely seen as the most senior prince after Nayef and the most likely to be given the role.
Salman is thought to have been born in around 1936 and is the father of the country's tourism minister, Prince Sultan bin Salman, who in 1985 became the first Arab astronaut.
Former diplomats to Riyadh say he has a reputation as religious, and has wide experience dealing with foreign governments due to the country's many expatriate workers.
Sultan had been defense minister for five decades and analysts say Salman may succeed his older brother as defense minister, although another likely candidate is Sultan's son, Prince Khaled, who has been deputy defense minister since 2001 and led Saudi forces during the 1991 Gulf War.
Nayef may give up the interior ministry if he becomes crown prince and a senior prince would need to take the role, given that the job involves supervision of all provincial governors, who are themselves princes.
"It would be a protocol issue and better to maintain it with a senior prince," said Shobokshi.
Nayef's son Prince Mohammed has impressed Western observers as a Deputy Interior Minister with the efficiency of his war on Islamic militants in the kingdom, but may be seen as lacking the requisite seniority.
That may suggest an increased role be given to his uncle, Prince Ahmed, who is also a full brother of Sultan, Nayef and Salman and has also been a Deputy Interior Minister since 1975.
Ahmed went to university in California and was tasked with introducing reforms in the Eastern Province to improve the situation of Saudi Arabia's minority Shi'ite population after some of its members revolted in 1979 over discrimination.
(Editing by Louise Ireland)