UPDATE 3-U.S. defense chief orders strategy review in response to budget cuts
* Hagel cites "budgetary and strategic uncertainty"
* Pentagon struggling to cut $46 billion this year
* Review due to be completed by end of May
WASHINGTON, March 18 (Reuters) - Defense Secretary Chuck Hagel has directed senior Pentagon officials to re-examine the U.S. military strategy approved last year to see how priorities may need to be adjusted due to budget cuts that took effect on March 1, U.S. officials said.
The decision, made on Friday, comes as the Pentagon struggles to cut $46 billion from this year's defense budget and faces the prospect of an additional $50 billion per year in reductions for the next nine years.
"The Department of Defense must constantly examine the choices that underlie our defense strategy, posture and investments, including all past assumptions and systems," Hagel said in a memorandum obtained on Monday by Reuters.
"This will be especially important in the period ahead, as both budgetary and strategic uncertainty affect our planning. We must think and act ahead of this uncertainty and not in reaction to it," he said in the memo, which was dated on Friday.
Underscoring the uncertainty facing the department, the Congressional Budget Office warned on Monday that the Pentagon's future plans - submitted last year before the recent budget cuts took effect - would "exceed the funding allowed ... by a large margin."
The Pentagon would need about $550 billion a year for its five-year plan submitted in 2013, about $21 billion more each year than its initial estimates and $74 billion a year more than it was likely to get after the March 1 cuts, the CBO said.
In his memo, Hagel asked senior Pentagon officials to define for him the major strategic choices and institutional challenges facing the U.S. military in the decade ahead and what it must do to adapt.
A senior Pentagon official said the review was not a "fresh start toward a new strategy," but would flow directly from the strategic guidance approved by President Barack Obama last year, which calls for a shift in emphasis to the Asia-Pacific region.
"The department hopes never to have to work toward the contingencies this review might identify," the official said. If the budget cuts, under a process known as sequestration, are lifted, "those contingencies are likely to go away," the official said.
The review, which is due by the end of May, will frame the secretary's guidance for the 2015 fiscal year budget and be the foundation for the 2014 Quadrennial Defense Review, a congressionally mandated assessment of the major strategic choices and challenges facing the U.S. military.
Defense officials have become increasingly vocal in recent weeks about the need to re-examine the defense strategy as it has become clear that Congress and the White House may be unable to reach a deal to avert $500 billion in defense cuts over the next decade.
The defense strategy approved in January 2012 called for a shift in strategic focus to the Asia-Pacific region following more than a decade of war in Afghanistan and Iraq. The new strategy coincided with the implementation of $487 billion in cuts to the defense budget over a decade that began last year.
SECOND ROUND OF CUTS
The strategy did not take into account a second round of $500 billion in budget cuts that went into effect on March 1. Defense officials had hoped that Congress and the White House would agree to a deal to avert those cuts, but a compromise never materialized.
Army General Martin Dempsey, chairman of the Joint Chiefs of Staff, said in a Facebook post last week that as a result of the long-term uncertainty posed by the budget cuts, he had "begun to reassess what our military strategy should be."
Speaking on Monday at the Center for Strategic and International Studies, a Washington think tank, Dempsey said he did not know if the defense strategy would have to change much as a result of the continuing budget cuts.
"But I predict it will," he said. "We'll need to relook our assumptions and need to adjust our ambitions to match our abilities. And that means doing less, but not doing less well."
Pentagon Comptroller Robert Hale told a conference last week that with $50 billion in spending reductions a year increasingly likely in 2014 and beyond, what the department most needed was a strategy that fit the likely resources available.
"We ... understand that we're probably not going to get the current level of defense resources," Hale said. "And so if there are to be substantial additional cuts, what we ask for is time to redo this strategy. We need to reconsider it so that we have a blueprint that's consistent with whatever level of resources we are likely to get."
Defense analysts have been urging the Pentagon to reconsider its strategy, noting that efforts to slash the U.S. budget deficits and the huge federal debt meant that further spending cuts were likely, making current strategy unaffordable.
A group of five former deputy defense secretaries urged Hagel in a letter earlier this month to conduct a thorough review of all aspects of Pentagon strategy, capabilities and budget to create a new long-term defense posture.