Mr Niyazov, considered as eccentric as he is despotic, has led the central Asian state since 1985 and retains a tight control over its economy. Yet the move, part of a wider crackdown on state benefits introduced on Wednesday, ends state maternity and sick leave payments and cancels pensions paid to 100,000 senior citizens.

An official for the social security ministry told the Associated Press that many of the remaining 229,000 pensioners would receive payments less than the current provision of $10 to $90 (between £5.60 and £51) a month. He said a review of pensions had found they were inflated, particularly those of farmers. Employers, not the state, would now have to make sick and maternity leave payments.

The move, which will directly affect the most vulnerable citizens of the region's most impoverished state, has been attributed to shortcomings in the state pension fund that forced Mr Niyazov to siphon hard cash from currency reserves to meet the benefits bill last year.

Rich in gas and oil, Turkmenistan has used state energy revenues to maintain Mr Niyazov's fiefdom. But the cash has apparently begun to run short; Turkmenistan is hoping to raise the price of the gas it sells to Russia and Ukraine. Mr Niyazov has avoided the critical glare of the international community, his benign dictatorship appearing relatively harmless when compared with the efficient brutality of neighbouring Uzbekistan.

Mr Niyazov, 65, likes to be referred to as Turkmenbashi, or "the leader of all Turkmen", and has renamed both a town and the month of January after this title. He has also renamed April - and bread - after his late mother. He has reportedly banned gold teeth, smoking, video games, recorded music, lip-syncing to songs, makeup on newscasters, young men from growing beards or long hair, and anyone from owning more than one cat or dog. Doctors swear allegiance to him, and licensed drivers have to take a morality test.

But the direct economic hardships of the pension reform risk fomenting serious protest. Opposition activist Batir Mukhamedov, in Moscow, claimed that in Krasnovodsk, now named Turkmenbashi, pensioners had marched on the local administration to demand an explanation, and some had committed suicide.

Mr Niyazov declared himself "president for life" in 1999, using parliament to rubber-stamp the move. Turkmenistan is cut off from the rest of the world through a restrictive visa regime and tight media controls, but US insistence on democratic values may have been behind the surprising decision last year to declare free elections in 2010. Last year, Pentagon officials made repeated visits to the capital Ashgabat, denying reports they were negotiating a US military base in the country, having been thrown out of Uzbekistan.

While Mr Niyazov's image adorns the country's currency and countless town squares across the country, Mr Mukhamedov said unemployment was up to 80%. Aids and tuberculosis were also thought to be rife.