The Eastern front has been greatly reduced owing to the political upheaval in Russia. There can be no question of an offensive on a large scale on the part of Russia. A further easing of the situation would release more men even if it were considered necessary to have a strong barrier on the Russian frontier to guard against local disturbances owing to the revolutionary movement. With the additional forces, the conditions in the West would become more favourable for us. The withdrawal of men would also provide more troops for the Austrian-Hungarian Monarchy for the successful carrying out of the fighting on the Italian front until the end of the war is reached.

In both Allied Monarchies there is an ample supply of raw material for the manufacture of munitions. Our situation as regards provisions is such that with the greatest economy we can hold out until the new harvest. The same applies to Austria-Hungary, especially if her share of the supplies from Roumania are taken into consideration.

The deeds of our navy rank beside the successes of the army. When Admiral von Holtzendorff was permitted to lay before His Apostolic Majesty the plans for the U-boat warfare, the prospects of success for this stringent measure had been thoroughly tested here and the expected military advantages weighed against the political risk. We did not conceal from ourselves that the infliction of a blockade of the coasts of England and France would bring about the entry into war of the United States and, consequently, a falling off of other neutral states. We were fully aware that our enemies would thus gain a moral and economic renewal of strength, but we were, and still are, convinced that the disadvantages of the U-boat warfare are far surpassed by its advantages. The largest share in the world struggle which began in the East has now been transferred to the West in ever increasing dimensions, where English tenacity and endurance promote and strengthen the resistance of our enemies by varied means. A definite and favourable result for us could only be achieved by a determined attack on the vital spot in the hostile forces; that is, England.

The success obtained and the effect already produced by the U-boat warfare far exceed all calculations and expectations. The latest statements of leading men in England concerning the increasing difficulty in obtaining provisions and the stoppage of supplies, as well as corresponding comments in the Press, not only include urgent appeals to the people to put forth their utmost strength, but bear also the stamp of grave anxiety and testify to the distress that England is suffering.

The Secretary of State, Helfferich, at a meeting of the Head Committee of the Reichstag on the 28th ult., gave a detailed account of the effects of the U-boat warfare on England. The review was published in the Norddeutsche Allgemeine Zeitung of the 1st inst. I beg herewith to refer to the enclosed.[8]

According to the latest news the Food Controller, Lord Rhondda, owing to the inadequate supply of corn, has been compelled to specify a new allotment of cargo space. This is already so restricted that more room for corn can only be secured by hindering the conduct of the war in other ways. Apart from abandoning overseas traffic, vessels could only be released by cutting down such imports as absorbed much space. England requires not only great transport facilities for provisions but also for the import of ore to keep up war industries, and also pit props to enable the coal output to be kept at a high level. In the case of the ore needed for England and the wood available in the country, it is not possible to restrict the cargo space in these two instances. Already, after three months of the U-boat warfare, it is a fact that the shortage of cargo space caused by the U-boats reduces the living conditions of the population to an unbearable extent, and paralyses all war industries, so much so that the hope of defeating Germany by superior stores of munitions and a greater number of guns has had to be given up. The lack of transport facilities will also prevent the larger output of war industries in America making up for the lesser output in England. The speed with which the U-boat warfare has destroyed vessels excludes the possibility of building new vessels to furnish adequate cargo space. More vessels have been destroyed in a month of U-boat warfare than the English dockyards have turned out in the last year. Even the thousand much-talked-of American wooden vessels, if they were there, would only cover the losses of four months. But they will not come before it is too late. English experts on the subject have already said quite openly that there are only two ways of counteracting the effect of the U-boats: either to build vessels quicker than the Germans destroy them, or else to destroy the U-boats quicker than the Germans can build them. The first has proved to be impossible, and the U-boat losses are far less than the new vessels building.

England will also have to reckon on a progressive rise in the loss of tonnage.

The effects of the U-boat warfare on the people's provisions and on all private and Government activities will be felt more and more.

I anticipate, therefore, the final results of the U-boat warfare with the greatest confidence.

According to secret but reliable information, the Prime Minister Ribot recently stated to the Italian Ambassador in Paris that France was faced with exhaustion. This opinion was expressed before the beginning of the last Franco-English offensive. Since then, France has sacrificed life to a terrible extent by keeping up the intensity of the fighting until the offensive ceased.