(3) Cipher
"Cedarhurst, July 2nd, 1915.
"In spite of the English interference with the American mails reported here to-day, I hope that the reports dispatched in the ordinary course of my duty have all reached your Excellency safely. In case they have not done so, I may report that since my audience with Mr. Wilson, the removal of the 'agitator' Dernburg, the mission of Meyer Gerhardt, and the arrival of the Press telegrams from Berlin giving details of the last-named, things have been pretty quiet generally; the situation has reverted to the normal, and will remain normal if our next Note shows a conciliatory disposition. I might even go further, and say that the Lusitania incident, taking it all in all, despite the manner in which we dealt with it, has exercised and will exercise in the future a favorable influence on our mutual relations. Of course it has brought us into even greater odium with our avowed enemies; Anglophile 'Society' in New York, Philadelphia and Boston is infuriated, and the Wall Street magnates are little better; but these two cliques have always been inveterate supporters of England. The Government has lost ground for the first time as a result of the Lusitania incident, and it now fully realizes the importance of these questions of sea warfare; whereas when I first spoke in February, March and April to various exalted personages about the submarine campaign and kindred matters, no one would listen to me, and the full seriousness of the situation was quite unrealized. Now, however, 'the freedom of the seas' has become the test question of American politics. Every preparation has been made to take energetic measures with regard to England if our answer to the last American Note renders further negotiations possible. Even the New York Press has become more reasonable, and capable of discussing war questions impartially; and this was notably the case over the torpedoing of the Armenian. In a word, at no time since the outbreak of war have the omens been so favorable for a rational policy on the part of America."
"Cedarhurst, July 22nd, 1915.
"If we ask what have-been the results of our eleven weeks' negotiations over the Lusitania incident, and which involved the employment of all our available arts of persuasion, we may well reply that we have, despite our grave difficulties, averted the severance of diplomatic relations and the inevitable war that must have followed. The former possibility, at all events, was at one time considerably more probable than most people in Germany are aware of.
"There could have been but one opinion among those I who saw and felt it as to the popular attitude of mind during the first few weeks following the Lusitania incident. In such circumstances we had only one possible resource left to us, to gain time, and hope for the restoration of a more friendly disposition in this country. The continuation of negotiations rendered this contingency possible; and so matters eventually turned out.
"We can hope for further results only if the American Government decides to institute simultaneous negotiations with Berlin and London, with the object of bringing about a settlement. Our own views and those of America are radically divergent, and no mere one-sided discussion between us can bridge the gulf. The American Government went too far in its first Note to allow of its withdrawing now; although it admits our submarine campaign to have been a legitimate form of reprisal against the English hunger blockade, it still persists in holding us responsible for damage to American lives and limbs resulting from these reprisals. Put briefly the demands of the United States are therefore:
"1. A full apology in some form or other, and indemnification for the lives lost in the Lusitania.
"2. An undertaking that no passenger ships shall in future be sunk without preliminary warning.
"The latest Note from America, which is already on its way to Berlin, will in a sense bring the negotiations to a conclusion, as the Government want to have a definite basis of agreement which may form the foundation of their discussions with England. In my conversations with Mr. Lansing I have been given to understand that the Government wish to know verbally or in writing whether we are in a position to incline somewhat to the American point of view, and whether we can see our way to assist the present Government to secure by means of joint conversations with Germany and England the freedom of the seas, which has always been the main object of Mr. Wilson's endeavors."