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By Phil Stewart
WASHINGTON, Feb 27 (Reuters) - Decorated Vietnam veteran Chuck Hagel was sworn in as U.S. defense secretary on Wednesday after a bruising Senate confirmation battle, promising to renew old U.S. alliances and forge new ones without attempting to "dictate" to the world.
Addressing Pentagon employees shortly after a small, closed-door swearing-in ceremony, Hagel spoke optimistically, if vaguely, about global challenges ahead and the importance of American leadership abroad.
"We can't dictate to the world. But we must engage the world. We must lead with our allies," Hagel said in what appeared to be unscripted remarks.
"No nation, as great as America is, can do any of this alone."
He also plainly acknowledged the prospect of looming automatic budget cuts, known as the sequester, saying flatly: "That's a reality. We need to figure this out."
"We need to deal with this reality," he added, as hopes dim in Washington that Congress might act in time to forestall $46 billion in Pentagon cuts due to kick in on March 1.
In a separate, written message to Pentagon employees, many of whom are set to be put on unpaid leave this year, Hagel noted his concerns on the impact of the cuts on personnel and military readiness.
Hagel, a former two-term Republican U.S. senator from Nebraska, broke from his party during the administration of George W. Bush to become a fierce critic of the Iraq war.
Many Republicans opposed to Hagel's nomination scorned him over Iraq and raised questions about whether he was sufficiently supportive of Israel, tough enough on Iran or truly committed to maintaining a robust nuclear deterrent.
The 58-41 Senate vote to confirm him late on Tuesday was the closest vote ever to approve a defense secretary, with only four Republicans supporting him.
AMERICA MUST USE POWER "WISELY"
Hagel did not acknowledge any Republican criticisms or reveal any personal concerns about working with Congress during his remarks on Wednesday. But he did articulate his views about the need for caution when America flexes its muscle abroad.
"We have great power and how we apply our power is particularly important," Hagel said.
"That engagement in the world should be done wisely. And the resources that we employ on behalf of our country and our allies should always be applied wisely."
Hagel's views of war and the limits of American military power were shaped in part by his experiences in Vietnam, where he fought as an infantryman alongside his brother and was awarded two Purple Hearts, the medal given to troops wounded in battle.
Hagel still carries the shrapnel from one of his injuries and he is the first Vietnam veteran to lead the Pentagon.
Introducing Hagel in the Pentagon auditorium, an Army infantryman with two tours in Afghanistan said Hagel "knows the very real cost of war" and was guided by principals to use force only when necessary.
Among his first tasks, Hagel will start weighing in on crucial decisions about the Afghan war, notably the size and scope of the American force that President Barack Obama will leave behind in the country once NATO declares its combat mission over at the end of 2014.
Leaving fewer troops than U.S. commanders recommend could create tension with the military, and become a lightening-rod issue with Republicans.
Hagel's predecessor, former defense secretary Leon Panetta, discussed with NATO allies in Brussels last week keeping a NATO force of between 8,000 and 12,000 troops. A senior NATO official said last month that the United States expects other NATO allies to contribute between a third and half the number of troops Washington provides.
In his written message, Hagel thanked troops and their families for their sacrifices -- there are more than 66,000 American troops in Afghanistan now -- but also looked past the Afghan war.
"As we turn the page on more than a decade of grinding conflict, we must broaden our attention to future threats and challenges," Hagel said.
"That means continuing to increase our focus on the Asia-Pacific region, reinvigorating historic alliances like NATO, and making new investments in critical capabilities like cyber." (Editing by Warren Strobel and Paul Simao)