But the United States has not given up its battle against Iran's nuclear programme, which Washington says is a front to develop nuclear weapons. Iran denies this, insisting its atomic ambitions are limited to the peaceful generation of electricity.
"The US has taken the most graceful way out of this situation," a Western diplomat said ahead of the meeting of the International Atomic Energy Agency's (IAEA) board of governors.
"It has decided to back ElBaradei in exchange for what it hopes will be a tougher stance on Iran," the diplomat said on condition of anonymity.
Washington had said it opposed the 62-year-old Egyptian, who has run the IAEA since 1997, because it thought UN agency heads should only have two terms.
But UN diplomats say the real reason is the US belief that he was soft on Iraq and Iran.
"It has decided to back ElBaradei in exchange for what it hopes will be a tougher stance on Iran"
Diplomats at the Vienna-based IAEA denied that ElBaradei had cut any deals with the Americans to get their backing when the 35 nations on the IAEA board vote on his reappointment bid.
ElBaradei's deputy, Pierre Goldschmidt, will inform the board about progress in the IAEA's two-year investigation of Iran.
"It's going to be a tough report," a diplomat from one of the three European states negotiating with Iran said.
"It's going to please the Americans but not the Iranians."
Report on Iran
The EU's three big powers - France, Britain and Germany -share US suspicions that Iran wants nuclear weapons and are determined to prevent Tehran from mastering the science of uranium enrichment, a process of purifying uranium for use as fuel in nuclear power plants or weapons.
Iran has frozen its enrichment programme temporarily, but has rejected the EU trio's offer of US-backed incentives if it terminates and dismantles all its enrichment-related facilities.
Tehran has said it would only maintain the suspension until the end of July, when the Europeans have promised to deliver a detailed offer of incentives for the Islamic republic.
Diplomats said the board may also hear how Pakistan has helped the IAEA confirm Iran's explanation for the discovery of bomb-grade uranium on machinery Iran bought on the black market.
A preliminary analysis of Pakistani components for enrichment centrifuges identical to ones Iran purchased from Pakistan appears to back Tehran's assertion that the traces of bomb-grade uranium were the result of contamination, Vienna officials familiar with the IAEA investigation of Iran said.
The board will also discuss its other major headache - North Korea - which expelled IAEA inspectors in late 2002 and later withdrew from the nuclear Non-Proliferation Treaty (NPT).
ElBaradei has described North Korea, which says it has already developed nuclear weapons, as the greatest proliferation threat facing the world. He has urged Pyongyang to return to the six-party talks aimed at persuading it to return to the NPT.
The IAEA sees North Korea as the
most dangerous nuclear threat
Finally, the IAEA board is expected to approve a request by Saudi Arabia to sign an agreement that would severely curtail the agency's ability to verify that Riyadh does not have any nuclear secrets, diplomats on the IAEA board said.
US-EU Saudi request
The United States and the European Union have asked Saudi Arabia to withdraw its request to sign the IAEA agreement but Riyadh has refused, the diplomats said.
A Saudi Foreign Ministry official said on Sunday that the kingdom wanted to cooperate with the IAEA and had no "nuclear installations, reactors, fissile or source materials". But the official signalled the Saudis still wanted the agreement that would clip the IAEA's wings in Riyadh.