By Anthony Boadle
HAVANA (Reuters) - Ailing Cuban leader Fidel Castro steppeddown on Tuesday 49 years after taking power in an armedrevolution, closing the book on a Cold War career that made himan icon to leftists and a tyrant to his foes.
Castro, 81, who has not appeared in public since undergoingstomach surgery almost 19 months ago, said he would not seek anew term as president or leader of Cuba's armed forces when theNational Assembly meets on Sunday.
His retirement raised expectations for change on thecommunist island, and calls by Castro's arch-enemy, the UnitedStates, for democracy, but Cuba experts said limited economicreforms were more likely than swift political transformation.
"To my dear compatriots, who gave me the immense honour inrecent days of electing me a member of parliament ... Icommunicate to you that I will not aspire to or accept -- Irepeat not aspire to or accept -- the positions of president ofthe Council of State and commander-in-chief," Castro said in astatement published in the Communist Party's Granma newspaper.
U.S. President George W. Bush, who has tightened thedecades-old economic embargo against Castro's government, saidhis retirement should begin a democratic transition.
"Eventually this transition ought to lead to free and fairelections. And I mean free and I mean fair," Bush said inRwanda during a tour of Africa.
Cuba's National Assembly, a rubber-stamp legislature, isexpected to nominate Castro's brother and designated successorRaul Castro as president. The 76-year-old defence minister hasbeen running the country since emergency intestinal surgeryforced his older brother to delegate power on July 31, 2006.
Raul Castro has promoted more open debate about thefailings of Cuba's state-run economy, but he is unlikely tomake bold political changes to the one-party state. FidelCastro will remain influential as first secretary of the rulingCommunist Party.
"This is a crucial moment. Cuba wants change, the peoplewant change," said Oswaldo Paya, Cuba's best-known dissident.
CUBANS NOT SURPRISED
Cubans on the quiet streets of Havana reacted withoutsurprise, some with sadness, to Castro's retirement, firstannounced on Granma's Web site in the middle of the night.
"Everyone knew for a while that he would not come back. Thepeople got used to his absence," said Roberto, a self-employedCuban who did not want to be fully named.
"I don't know what to say. I just want to leave. Thissystem cannot continue," said Alexis, a garbage collector.
"The Revolution will continue. Fidel resigned in time. Itis a wise decision. He let Cubans get used to his absence for18 months," said Lazaro, a building administrator sweeping alobby in slippers. He said the only economically viableinstitution in Cuba was the armed forces run by Raul Castro andhoped their efficiency would spill over into the rest of theeconomy.
"His body gave up after so many years fighting for socialjustice and the independence of Cuba from American control,"said a saddened psychology professor who identified himselfsimply as Dr. Alvizu.
In Miami, the heartland of exiled opposition to the Castrobrothers, reaction was subdued.
"It's very good that Fidel resigns. But if Fidel dies, it'sbetter," said Juan Acosta, a Cuban who left the Caribbeanisland in 1980, as he stopped to buy a newspaper on Calle Ocho,the main street in Miami's Little Havana neighbourhood.
The Democratic hopefuls vying to represent their party inthe November U.S. election, Sens. Hillary Clinton and BarackObama, suggested they might lift the trade embargo if Cubapursued democratic reforms. Republican front-runner John McCainsaid the United States must keep up the pressure.
European governments said Castro's retirement could openthe door to democratic change.
"Fidel Castro's resignation is the end of an era thatstarted with freedom and ended with oppression," said SwedishForeign Minister Carl Bildt.
CHARISMATIC GUERRILLA
The charismatic Castro led the bearded and cigar-chompingguerrillas who swept down from the mountains of eastern Cuba tooverthrow U.S.-backed dictator Fulgencio Batista in 1959.
He then turned Cuba into a communist state on the doorstepof the United States and became the world's longest-servinghead of state, barring monarchs.
Castro survived a CIA-backed invasion of Cuban exiles atthe Bay of Pigs in 1961, as well as assassination attempts, thecontinuing U.S. trade embargo, and an economic crisis in the1990s after the collapse of Soviet bloc communism.
He played a role in taking the world to the brink ofnuclear war in 1962 when he let Moscow put ballistic missilesin Cuba, leading to a 13-day stand-off between U.S. PresidentJohn F. Kennedy and Soviet premier Nikita Khrushchev.
Famous for long speeches delivered in green militaryfatigues, Castro is admired in the Third World for standing upto the United States but considered by his opponents a dictatorwho suppressed freedom and wrecked Cuba's economy.
Castro was close to death in 2006 and has looked gaunt andfrail in the few videotapes of him broadcast since his surgery,but Cuba's leadership has showed no sign of collapse.
"Fortunately, our Revolution can still count on cadres fromthe old guard and others who were very young in the earlystages of the process," Castro said in Tuesday's statement. Hewill continue to write his newspaper columns.
"This is not my farewell to you. My only wish is to fightas a soldier in the battle of ideas ... It will be just anotherweapon you can count on. Perhaps my voice will be heard."
Frank Mora, a political scientist at the National WarCollege in Washington, said Castro's successors will likely beforced to head down paths he would not approve.
"He will not go into some sunset nor will he become thatcrazy uncle in the attic, but they are pushing him up thosestairs," Mora said.
(Additional reporting by Rosa Tania Valdes in Havana,Deborah Charles in Rwanda, and Michael Christie in Miami;Editing by Kieran Murray and Patricia Zengerle)