Finally, Smirnoff, in spite of the many suggestions and proposals, decided to settle the matter as peacefully as possible. He accordingly sent for General Kondratenko and Colonel Reuss, and told them that he recognized the necessity for a division of authority, and so was quite prepared to give up all his powers, save only the actual defence of the Fortress, for which he intended to remain responsible. Reuss expressed regret for all that had happened, and promised to use his power to keep evil influences from getting at Stössel.
Next day Order 285 was issued by the Officer Commanding the District, and clearly showed that Stössel was not inclined to conciliation:
'As the enemy has appeared in the area of the Fortress, and the 4th East Siberian Rifle Division, with its artillery, has joined the troops in it, I now assume supreme command of the defence, and, in order to centralize authority, the Chief of my District Staff will in future be present at the Council of Defence established under the presidency of the Commandant. All resolutions, etc., of the Council will be given to him to report to me for my confirmation.'
Why did he publish the order? Its only result was to take the control of the Fortress from the hands of the real chief, who, according to all regulations, should have been in supreme command. Then, when Fock's entire Division arrived on Wolf's Hills, a council was summoned, at which the question of what further steps were to be taken was brought up—whether the outer positions on Green Hills were to be held, or whether the defence of the advanced fortified positions of the Fortress was now to begin. The Commandant protested against the latter, energetically insisting that the Green Hills must be held, because the Fortress itself was not quite ready, and, what was more important, because Wolf's Hills and Ta-ku-shan and Sia-gu-shan Hills were not fortified, and were most important strategic points. Fock asserted that it was unsound to attempt to hold the enemy on field positions; that it would be a mere waste of men and ammunition, which might be so essential for the defence of the Fortress itself, to which a withdrawal must sooner or later be made. It would be wiser to neglect Wolf's Hills and retire at once into Port Arthur, and so commence its defence with the maximum number of men. Stössel agreed with Fock. Then the Commandant explained his scheme in detail, and pointed out that as soon as the blockade became strict the Japanese would get possession of Wolf's and Sia-gu-shan and Ta-ku-shan Hills; that, in that case, the inner and outer harbours would be impossible for ships, as the waters could be reached by indirect fire, and that none of our works could be successfully held.
Smirnoff's brilliant and lucid statement carried the council, which, by a majority of votes (including Stössel's), decided that Fock's Division should be sent back to occupy the best of the outer positions still in our possession. It is interesting to note that as the country had not even up till now been thoroughly reconnoitred by the District Staff, they were unable to say at the meeting which were the best remaining positions! Of the splendid positions on the heights at Nangalin no one had given a thought. According to the reports of our scouts and reliable Chinese, these were already occupied by the Japanese. Next day some of General Stössel's staff rode out to choose positions. They stopped on the chain of hills named Upilazy, which border on Inchenzy Bay and Green Hills, stretching along the Lunwantun Valley to the little bay of the same name. The hills on the line of these positions, stretching for more than seventeen miles, were commanded by Kuen-san Hill. The positions on the Upilazy chain of hills (ten miles) were held by mixed companies of the four reserve battalions and the 7th Division with two companies of the Frontier Guards. To these were added eight field batteries and one howitzer battery. Fock took up his quarters at the seventh mile (the railway now only ran for twelve miles), and kept on repeating what he had said at the council—that it was only wasting men and ammunition to hold these positions—and was apparently quite ready to retire. Smirnoff, however, insisted on their being held. Engineers were sent to the flanks (there was only one sapper company of 800 men in the Fortress), and the fortification of the seventeen-mile-long positions was commenced. Fock would not hold the right, because he said the enemy would attack his left, and, as the position was too big for one division, Smirnoff sent the mixed companies above mentioned from the Fortress troops to hold the right. Owing to this the left was strongly fortified, but the right hardly at all.
The enemy having now taken complete possession of Dalny, at once used it as their base. There, quietly and comfortably, without any interference from us, they carried out the landing of troops for the investment. Ten transports would arrive daily, bringing everything necessary for the concentrating army. The railway from Dalny and all the rolling-stock was in perfect order, and by it troops, guns, ammunition, provisions, etc., were transported to the front. Everything smiled on them: our fleet did not hinder them in any way; they had command of both sea and the land.
During all this time our intelligence services were very badly run, our only source of information being the Chinese, who, working both for us and the enemy, naturally favoured the latter, as the District Staff paid a starvation wage.