All signs point to Hagel as pick for defense secretary

U.S. Senator Chuck Hagel speaks during a news conference at the U.S. embassy in Islamabad in this April 13, 2006 file photo.

WASHINGTON (Reuters) - President Barack Obama appeared poised on Friday to pick former Republican Senator Chuck Hagel as the next defense secretary and the announcement may come early next week.

Sources on Capitol Hill and in the national security community said all signs were pointing to Hagel as Obama's choice to replace current Defense Secretary Leon Panetta.

The choice would likely set up a confirmation battle in the Senate over whether Hagel strongly supports key U.S. ally Israel. Gay rights groups have also complained about some of Hagel's past remarks, which were seen as disparaging to them.

However, if Obama were to back down from picking Hagel, it would be the second embarrassment for him, after his preferred candidate for secretary of state, U.S. ambassador to the United Nations Susan Rice, withdrew from consideration in the face of determined opposition.

The White House insisted Obama had not yet made a final decision on Hagel, but a source close to the situation said the White House had signaled to Hagel's camp that he remained Obama's leading candidate for the post.

The source said the process was on track for likely nomination announcement on Monday or Tuesday.

It was not known whether Obama had finalized his decision or if Hagel had been directly informed. The source said Hagel's closest advisers had received "messages of reassurance" in recent days in the face of a campaign by Hagel's critics aimed at derailing his nomination.

Hagel has already faced an onslaught over his record on Israel and Iran led by some pro-Israel groups and neo-conservatives.

He has also come under fire from gay rights groups for remarks questioning whether an "openly aggressively gay" nominee could be an effective U.S. ambassador. Hagel last month issued an apology for the comment, made in 1998, saying it was "insensitive."

A Republican operative involved in the opposition to Hagel's nomination predicted he would have trouble getting confirmed by the Senate. "It's going to be a vicious fight," the operative said.

(Additional reporting by Susan Cornwell. Editing by Warren Strobel and Christopher Wilson)