Hillary Clinton has decided to accept the post of Secretary of State, aides to the former First Lady said last night, ending a week-long drama that had threatened to throw Barack Obama’s White House transition off course.

Aides to Mr Obama would say only that she was “on track” to become America’s top diplomat. But those close to Mrs Clinton said that she had decided to give up her Senate seat and take the job after a second round of talks this week, meaning that Mr Obama’s bitter rival for the Democratic nomination will now become his chief foreign policy official.

After a private meeting in Chicago last week, where the job of Secretary of State was discussed in general terms, Mrs Clinton held more detailed talks with Mr Obama about her role in his Administration and his foreign policy priorities, The New York Times reported.

Mr Obama’s bold gesture - which has unnerved some of his staff and supporters – follows his stated desire to assemble a “team of rivals” to govern in the mould of Abraham Lincoln, one of his heroes. The move by Mrs Clinton, 61, who appeared torn this week over whether to take the job, also came after several increasingly tense days of negotiations among lawyers in both camps, particularly over Bill Clinton’s complex foreign financial ties.

The former President produced an unprecedented disclosure of many of the overseas donors to his charitable foundation and library. A set of guide-lines was put in place for his future overseas speeches and fundraising, to avoid any potential conflict of interest between his dealings with foreign leaders and those of his wife.

Mrs Clinton has a global profile, both as a political leader in her own right and as the wife of the former President. Analysts say that her appointment could herald a hawkish US stance, noting that she has been more reluctant than Mr Obama to commit to a firm timetable for withdrawing US troops from Iraq.

Mrs Clinton’s apparent decision to work for the man whom she once belittled for having no experience of government came as a retired Marine general and former Nato commander emerged as a leading contender to become Mr Obama’s national security adviser, the most important foreign policy post in the White House.

James Jones, a decorated Vietnam veteran and former Supreme Allied Commander in Europe, is admired by Republicans and Democrats alike and is a close friend of the Republican candidate John McCain. He would bring particular expertise on Iraq and Afghanistan, two of Mr Obama’s overseas priorities when he takes office on January 20.

Leading contenders for two other posts in the critical area of the economy emerged last night. Tim Geithner, the president of the New York Federal Reserve Bank, is expected to be nominated as Treasury Secretary and Bill Richardson, the New Mexico Governor and former presidential candidate, is to head the Commerce Department.

No final decision has been made on who will be Mr Obama’s national security adviser, but the serious consideration being given to General Jones reflects the President-elect’s determination to put together a bipartisan team of strong characters and former rivals.

General Jones, 64, is also close to Mrs Clinton, but enjoys such cross-party appeal that in 2006 he was twice asked by Condoleezza Rice, President Bush’s Secretary of State, to be her deputy. He has been a critic of Mr Bush’s foreign policy and decried what he described as Donald Rumsfeld’s “systematic emasculation” of the US military’s top brass. Last year he conducted an investigation into Iraq and Afghanistan on behalf of Congress.

“Make no mistake, Nato is not winning in Afghanistan,” he said, adding that the war in Iraq had caused the US to “take its eye off the ball” in Afghanistan. He gave a warning that the consequences of failure there were just as serious as defeat in Iraq – views expressed by Mr Obama. Before Mr Obama travelled to Afghanistan during the presidential campaign, he was briefed by General Jones, who last year was appointed by Dr Rice as a special envoy for Middle East Security.

There are other contenders for the post, which involves coordinating the often competing agendas of the Pentagon, the US intelligence community and the State Department, and so becoming one of the President’s closest advisers. They include Susan Rice, a former Clinton White House adviser who sided with Mr Obama early in his campaign; Jim Steinberg, a former deputy national security adviser to Mr Clinton; and Richard Danzig, a former Secretary of the Navy.

Obama’s team

Confirmed in their positions

Chief of staff Rahm Emmanuel (C) Counsel Greg Craig (C, O) Senior adviser David Axelrod (O) Senior adviser Valerie Jarrett (O) White House press secretary Robert Gibbs (O) Vice-President’s chief of staff Ron Klain (C) (All White House positions)

Confirmed by sources pending vetting and formal announcement

Secretary of State Senator Hillary Clinton (C) Attorney-General Eric Holder (C, O) Secretary of Health and Human Services Former Senator Tom Daschle (O) Secretary of Homeland Security Governor Janet Napolitano (C, O) Treasury Secretary Tim Geithner Secretary of Commerce Bill Richardson (C, O)

Candidates for other top posts

Defence Secretary Incumbent Robert Gates (R) Richard Danzig (C, O) Senator Chuck Hagel (R)

(C) Worked in the Clinton Administration (O) Early Obama supporter (R) Republican / Independent

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