WASHINGTON (Reuters) - The Obama administration’s candidate for a top U.S. intelligence post withdrew on Tuesday amid congressional objections over his past criticism of Israel and ties to China and Saudi Arabia.

The withdrawal of Charles Freeman, named to head the National Intelligence Council which produces formal U.S. intelligence assessments of security issues, is the latest personnel embarrassment for President Barack Obama as he struggles to staff his administration.

“Charles Freeman was the wrong guy for this position. His statements against Israel were way over the top and severely out of step with the administration,” New York Democratic Senator Charles Schumer said in a statement.

Pete Hoekstra, the top Republican on the House of Representatives Intelligence Committee, said: “This is yet another breakdown in the Obama administration vetting process -- one more in a long series of missteps.”

Freeman is a former ambassador to Saudi Arabia, who has also served as an assistant secretary of defense and a senior diplomat in China.

National Intelligence Director Admiral Dennis Blair, who chose Freeman for the council position, had defended him in Congress earlier on Tuesday as a man of “strong views, of an inventive mind and the analytical point of view.” Blair said he preferred that to “precooked pablum judgments.”

But Freeman’s criticisms of Israel and a comment seen as condoning China’s Tiananmen Square crackdown had stirred controversy. He was quoted as saying in 2007, “The brutal oppression of the Palestinians by Israeli occupation shows no sign of ending,” and “American identification with Israel has become total.”

Blair said the remarks were taken out of context. After Freeman’s withdrawal, Blair’s office said he accepted his decision “with regret.” But officials declined to discuss reasons for the withdrawal.

In a note to friends and supporters, Freeman said he had withdrawn from consideration after concluding that “the barrage of libelous distortions” of his record would not end when he took office.

“I do not believe the National Intelligence Council could function effectively while its chair was under constant attack by unscrupulous people with a passionate attachment to the views of a political faction in a foreign country,” Freeman wrote.

Lawmakers also questioned Freeman’s professional ties. Freeman served on the international advisory board of the state-owned China National Offshore Oil Corp. when it made its 2005 bid for U.S. oil firm Unocal that was thwarted by U.S. congressional protest.

‘FORCES LINED UP AGAINST HIM’

He was also president of the Middle East Policy Council, a Washington think tank that received funding from Saudi Arabia.

Even as Blair defended Freeman on Tuesday, independent Senator Joseph Lieberman, a former Democrat, warned Blair at a Senate hearing that the controversy would not go away.

Lieberman’s opposition may have been the last straw for Freeman, said a source familiar with Obama administration security policy. “There were a lot of forces lined up against him,” the source said.

Freeman’s comments on Israel were a key issue, but the business ties also raised serious conflict-of-interest concerns in Congress for an official whose influential estimates cover the globe’s hot spots, the source said.

Freeman’s problems were magnified by Obama’s earlier difficulties with political appointees, he said.

The council that Freeman had been picked to head prepares the National Intelligence Estimates that are heavily relied on by Congress and administration policy makers.

Its work has come under intense scrutiny since it produced a controversial, and inaccurate, assessment in 2002 that Iraq was continuing its weapons of mass destruction programs. Former President George W. Bush’s main justification for the U.S.-led war he launched in 2003 was the threat of Iraqi weapons of mass destruction.

A 2007 estimate that Iran had suspended its work on nuclear weapon design also met criticism, this time from conservatives who said it undermined a hardline U.S. policy toward Tehran.

The National Intelligence Council position does not require Senate confirmation.