* Panetta to replace Gates as U.S. defense secretary
* Petraeus to take over as CIA chief from Panetta
* Budget battle, Afghan drawdown confront security team (Adds analyst comments, details, background)
By Phil Stewart and Steve Holland
WASHINGTON, April 27 (Reuters) - President Barack Obama will name Leon Panetta, a veteran Washington politician and the current CIA director, as U.S. defense secretary as he resets his national security team ahead of the 2012 presidential campaign and a battle over the Pentagon budget.
Obama will nominate General David Petraeus, who is running the war in Afghanistan after leading the campaign to quash the insurgency in Iraq, to replace Panetta at the CIA, U.S. officials also said on Wednesday.
Trouble-shooting diplomat Ryan Crocker, who has served as ambassador to Iraq, Pakistan, Syria, Kuwait and Lebanon, will be named as ambassador to Afghanistan.
The changes, which would require confirmation by the U.S. Senate, are expected to be announced on Thursday.
The long-anticipated overhaul could have broad implications for the Obama administration, which is pursuing deeper defense spending cuts in the face of a yawning budget deficit and will start withdrawing troops from Afghanistan this July.
Panetta is a Democratic party insider seen as close to Obama who could be more receptive to deeper defense spending cuts than outgoing Defense Secretary Robert Gates, a holdover from the Republican Bush administration.
Panetta, who turns 73 in June, is a former U.S. representative from California who was chairman of the House Budget Committee. He was former President Bill Clinton’s budget director, then chief of staff.
“Panetta has deeper experience with budget issues than any American national security official serving today,” said Travis Sharp, a defense analyst at the Center for a New American Security.
As well as starting the withdrawal from Afghanistan, the United States is set to pull its forces from Iraq entirely by the end of 2011. The course of the campaign in Libya is unclear as fresh challenges flare in North Africa and the Middle East.
The White House declined comment on the expected changes, as did the Pentagon. White House spokesman Jay Carney said only that “we’ll have a personnel announcement for you tomorrow.”
Gates’ clout among Republicans helped shield Obama from early criticism of his handling of war policy, a political asset that the president will be hard pressed to duplicate as he heads into the 2012 presidential campaign.
By choosing Petraeus, the commander of U.S. and NATO forces in Afghanistan, Obama advances perhaps the U.S. military’s most famous general and a hero among Republicans to one of the most important and difficult posts to fill in his administration.
Petraeus, 58, is credited with pulling Iraq from the brink of civil war and has trumpeted battlefield successes in Afghanistan after a surge of 30,000 additional troops ordered in by Obama in late 2009.
But Petraeus will find a somewhat less optimistic view of the Afghan campaign from inside CIA headquarters, where analysts have put forward a much more cautious outlook about the unpopular, nearly decade-old war.
Petraeus had left Afghanistan and and was expected to arrive in Washington before the White House’s Thursday announcement, officials said.
Before word of the reshuffle broke, some Washington insiders suggested the White House wanted a high-profile position for Petraeus to ensure he would not be tapped by Republicans to challenge Obama next year, perhaps as a vice-presidential choice.
One U.S. official said Lieutenant General John Allen, deputy commander of U.S. Central Command, would succeed Petraeus as head of the Afghanistan campaign.
Allen was a commander in Iraq’s western Anbar province at a pivotal moment when Sunni tribal leaders switched sides and started helping American troops fight al Qaeda, a strategy that U.S. officials say helped turn around the war. (Additional reporting by Mark Hosenball, David Morgan, David Alexander and Missy Ryan; Editing by David Storey and Vicki Allen)