Robert Gates, the man entrusted by President Bush to succeed Donald Rumsfeld and restore confidence in the War on Terror, admitted today that America was not winning the war in Iraq.

Mr Gates, a former director of the CIA under the President's father and a member of the Iraq Study Group, the team of veteran officials appointed come up with new ideas for the war, told his Senate confirmation hearing that the current US policy for Iraq was "not satisfactory".

In marked contrast to the truculence and optimism of his predecessor, when Mr Gates was asked by Senator Carl Levin, the incoming Democratic Chairman of the Senate Armed Services Committee, whether America was winning the war, he replied: "No, sir."

"What we are now doing is not satisfactory," he said. "In my view, all options are on the table, in terms of how we address this problem in Iraq."

Mr Gates, 63, is one of the cabal of veteran officials who have emerged to prominence in recent months as members of the Iraq Study Group, led by the former Secretary of State, James Baker, which is due to present its recommendations to Congress tomorrow.

The group is expected to suggest that the Bush Administration change its stance and seek the help of Syria and Iran to try and regain control of Iraq's security, which has broken down this year amid fierce sectarian fighting.

When asked about Syria and Iran — both identified as sponsors of terrorism by the White House — Mr Gates gave a mixed response today, saying that talks with Tehran and Damascus should be considered as a way to stop them meddling in Iraq but he expressed little hope about the outcome, especially in the case of Iran.

Although he said a military strike against Iran should be an "absolute last resort", Mr Gates informed the committee that he thought Iran's clerical regime and its hardline President, Mahmoud Ahmadinejad, were trying to build an atomic weapon under the guise of a civilian nuclear programme.

When asked whether he thought Iran's leaders were lying, Mr Gates replied: "Yes, sir, I do."

Mr Gates would not be drawn on whether he thinks the US should pull out some of its 140,000 soldiers from Iraq — a demand made by Democrats and Republicans alike during America's congressional elections, which were interpreted as a referendum on the three-year-old conflict.

He said he did not yet know enough about the situation on the ground to make a prediction, but he observed that the worst fate for Iraq would be for the US to withdraw too soon and leave the country at the mercy of its neighbours.

"Our course over the next year or two will determine whether the American and Iraqi people and the next President of the United States will face a slowly and steadily improving situation in Iraq and in the region or will face the very real risk of a regional conflagration," he said.

In tune with his earlier, written testimony for the hearing, Mr Gates stressed the need for co-operation in Washington and abroad to bring stability to Iraq. "We need to work together to develop a strategy that does not leave Iraq in chaos and that protects our long-term interests in and hopes for the region," he said.

At the start of what is expected to be a relatively smooth confirmation of his appointment today, Mr Gates was told he faced a "monumental challenge" as the next Secretary of Defence.

Mr Levin, who opposed Mr Gates's appointment as CIA director in 1991, said that if he was installed in the Pentagon, the former intelligence analyst would have to rectify the worsening security situation in Iraq; defeat a resurgent Taleban; reconnect the Pentagon with its staff and repair the battered equipment of the world's powerful military.

In what read as damning criticism of Mr Rumsfeld and the Bush Administration's conduct of the war so far, Mr Levin said: "If confirmed as Secretary of Defence, Robert Gates will face the monumental challenge of picking up the pieces from broken policies and mistaken priorities for the past few years."

Mr Gates was nominated as the next Secretary of Defence the day after Mr Bush's Republican Party suffered a resounding defeat in the congressional elections last month.

"He’s going to do an excellent job for us," said Mr Bush this morning, after meeting Mr Gates at the White House. "Those who wear the uniform know they will have a friend at the Defence Department in Bob Gates."

Mr Gates, who has never worked at the Pentagon before, was the first professional intelligence analyst to become director of the CIA in 1991.

He served as the deputy director of the agency under President Reagan but withdrew his nomination as director in 1987 because of rumours surrounding his role in the Iran-Contra scandal, in which Reagan Administration officials sold weapons to Iran and used the profits to fund Contra rebels in Nicaragua.

Thirty-one Senators opposed his nomination as director four years later because of his role in the affair and reports that Mr Gates had bent intelligence to suit Mr Reagan's policies towards the USSR. A native of Kansas, Mr Gates has been President of Texas A&M University since 2002.

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