Berlin, August 17, 1917.

Dear Count Czernin,—According to our agreement, I take the liberty briefly to lay before you my views of our discussions of the 14th and 15th inst., and would be extremely grateful if Your Excellency would be so kind as to advise me of your views on my activities.

The internal economic and political situation in Germany justifies me in the firm belief that Germany herself would be able to stand a fourth year of war. The bread-corn harvest promises better than we thought five or six weeks ago, and will be better than that of the previous year. The potato harvest promises a considerably higher yield than in 1916-17. Fodder is estimated to be much less than last year; by observing a unified and well-thought-out economic plan for Germany herself and the occupied territories, including Roumania, we shall be in a position to hold out with regard to fodder, as was also possible in the very dry year 1915.

There is no doubt that the political situation is grave. The people are suffering from the war, and the longing for peace is very great; however, there is no trace of any general and really morbid exhaustion, and when food is controlled any work done will be no worse than it was last year.

This economic and political prospect can only be altered if the condition of the Allies, or of the neutrals, under pressure from the Entente, should become very much worse. It would be a change for the worse for us if our Allies or the neutral states, contrary to our expectations and hopes, were to experience such shortage as would cause them to turn to us. To a certain extent, this is already the case; a further increase of their claims would greatly prejudice our economic position and in certain cases endanger it. It must be admitted that the situation in the fourth year of war in general is more difficult than in the third year. The most earnest endeavours, therefore, will be made to bring about a peace as soon as possible.

Nevertheless, our genuine desire for peace must not lead us to come forward with a fresh peace proposal. That, in my opinion, would be a great tactical error. Our démarche for peace last December found sympathy in the neutral states, but it was answered by our adversaries raising their demands. A fresh step of the kind would be put down to our weakness and would prolong the war; any peace advances must come now from the enemy.

The leading motive in my foreign policy will always be the watchful care of our Alliance with Austria-Hungary that the storm of war has made still stronger, and a trusting, friendly and loyal co-operation with the leading men of the Allied Monarchy. If the spirit of the Alliance—and in this I know Your Excellency agrees—remains on the same high level as heretofore, even our enemies would see that it was impossible for one of the Allies to agree to any separate negotiations offered to him, unless he states beforehand that the discussion would only be entered into if the object were a general peace. If this were clearly laid down there could be no reason why one of the Allies should not listen to such proposal from the enemy and with him discuss preparations for peace.

At present no decided line of action can be specified for such a proceeding. Your Excellency was good enough to ask me whether the reinstatement of the status quo would be a suitable basis on which to start negotiations. My standpoint in this matter is as follows: I have already stated in the Reichstag that Germany is not striving for any great changes in power after the war, and is ready to negotiate provided the enemy does not demand the cession of any German territory; with such a conception of the term "reinstatement of the status quo," that form would be a very suitable basis for negotiations. This would not exclude the desired possibility of retaining the present frontiers, and by negotiating bring former enemy economic territory into close economic and military conjunction with Germany—this would refer to Courland, Lithuania and Poland—and thus secure Germany's frontiers and give a guarantee for her vital needs on the continent and overseas.

Germany is ready to evacuate the occupied French territory, but must reserve to herself the right, by means of the peace negotiations, to the economic exploitation of the territory of Longwy and Briey, if not through direct incorporation, by a legal grant to exploit. We are not in a position to cede to France any noteworthy districts in Alsace-Lorraine.

I should wish to have a free hand in the negotiations in the matter of connecting Belgium with Germany in a military and economic sense. The terms that I read out, taken from notes at the Kreuznach negotiations—the military control of Belgium until the conclusion of a defensive and offensive Alliance with Germany, the acquisition of Liége (or a long-term rental thereof)—were the maximum claims of the Supreme Military and Naval Command. The Supreme Military Command agrees with me that these terms or similar ones can only be secured if peace can be enforced on England. But we are of opinion that a vast amount of economic and military influence must be brought to bear in Belgium in the matter of the negotiations and would perhaps not meet with much resistance, because Belgium, from economic distress, will come to see that her being joined to Germany is the best guarantee for a prosperous future.