President Obama set in motion a major reshuffling of his national security team at the White House today, nominating CIA Director Leon Panetta to become Defense Secretary and Gen. David Petraeus to take the top job at the CIA. Their reassignments will create openings down the chain of command at the Pentagon.
Panetta will succeed Defense Secretary Robert Gates, who will leave his post this summer after serving since 2007. Gen. Petraeus, currently commanding forces in Afghanistan, will move into Panetta's job at the helm of CIA, as sources had confirmed to ABC News on Wednesday.
The move of Panetta, who was budget director for President Clinton during the 1990s, to the Defense Department is seen as a signal that the White House will apply a budget-cutting scalpel to spending at the Pentagon.
"As we make the hard decisions that are needed to reduce America's debt, we cannot compromise our ability to defend our nation or our interests around the world," the president said, as he announced Panetta's nomination.
President Obama's deficit reduction plan calls for $400 billion in cuts at the Pentagon over a dozen years.
Panetta called this a time of "hard choices" for the country.
"It's about ensuring that we are able to prevail in the conflicts in which we are now engaged, but it's also about being able to be strong and disciplined in applying our nation's limited resources to defending America," he said.
Obama said that Petraeus' experience leading the fights in Afghanistan and Iraq will help him at the CIA.
"David's extraordinary knowledge of the Middle East and Afghanistan uniquely positions him to lead the agency in its effort to defeat al-Qaida. In short, just as General Petraeus changed the way that our military fights and wins wars in the 21st century, I have no doubt that Director Petraeus will guide our intelligence professionals as they continue to adapt and innovate in an ever-changing world," he said.
In addition, Marine Gen. John Allen will be nominated to replace Petraeus at International Security Assistance Force in Kabul, Afghanistan; and former U.S. Ambassador to Iraq Ryan Crocker will be nominated as U.S. Ambassador to Afghanistan. Joint Chiefs Chairman Mike Mullen is expected to leave his post in October, and Vice Chairman James Cartwright remains the frontrunner. Others in contention include Adm. James Stavridis, who commands U.S. forces in Europe, or Army Chief of Staff Gen. Martin Dempsey.
Gen. Ray Odierno, who succeeded Petraeus as the top commander in Iraq in 2008 and served there until 2010, is currently the commander of U.S. Joint Forces Command.
Finally, former U.S. Ambassador to Iraq Ryan Crocker will replace outgoing U.S. Ambassador to Afghanistan Karl Eikenberry. Crocker is also a former U.S. Ambassador to Pakistan and knows the region well.
Neither Panetta nor Petraues are expected to meet resistance on Capitol Hill.
Panetta, a former congressman and chief of staff to President Bill Clinton, is well liked on Capitol Hill. Petraeus has commanded American forces in both Iraq and Afghanistan during key transitional periods.
If all goes according to plan, according to Pentagon sources, Panetta will be installed at the Pentagon by the end of the summer. Current Defense Secretary Robert Gates, who has served both under President Bush and President Obama, has long made clear he wants to leave the demanding job.
Obama said it is a pivotal time for the country, citing the transition away from two wars that have dominated the United States foreign policy for the better part of a decade.
"In Iraq, we're working to bring the rest of our troops home as Iraqis secure their democracy. In Afghanistan, we're moving into a new phase: transferring responsibility for security to Afghan forces, starting to reduce American forces this summer, and building a long-term partnership with the Afghan people,"
He also pointed to the revolutionary spirit that led to new governments in some countries and protracted armed struggles in others, especially Libya, where American forces are helping to enforce a no-fly zone against Libyan President Moammar Gadhafi.
"As people across the Middle East and North Africa seek to determine their own destiny, we must ensure that America stands with those who seek their universal rights, and that includes continuing to support the international effort to protect the Libyan people," he said.
The staffing changes will come at a pivotal time in particular for the war in Afghanistan, where Petraeus is supposed to start withdrawing troops this summer if he is to stick with the timeline envisioned by President Obama.
Today Petraeus referred to his "guarded optimism about the trajectory of the mission" in Afghanistan.
The plan is for the U.S. to begin pulling out U.S. combat troops from Afghanistan in July, but there has still been no recommendation made by Gen. Petraeus about how many troops should come home.
With Reporting from ABC's Martha Raddatz and Luis Martinez