Towards the end of the year the lack of tonnage began to be felt acutely, and it became clear that this lack was the chief difficulty that England had to face as a result of U-boat warfare. In January, 1916, the new Chief of the Naval Staff handed in a memorandum in which he subjected British economic conditions to a thorough examination, and drew the following conclusions from his investigations:

1. The U-boat campaign of last year, gradually increasing its weapons but hampered by growing restrictions of a non-military nature, dealt a blow to a new economic entity hitherto little affected by the war and capable of strong resistance. By means of a scarcity which was mostly felt in a considerable rise in the price of important foodstuffs as well as of manufactured goods and! raw materials, it reduced England's commerce to such an extent that serious economic and financial injury is apparent in all directions. This injury has aroused a feeling of considerable anxiety in England, where it was felt that a vulnerable spot was threatened; moreover, it was calculated gradually to make England inclined for peace. The effect wore off as soon as England was certain that for reasons due to considerations of a non-military nature the U-boat campaign would not be continued.

2. The economic changes set up by the U-boat campaign have persisted, though for the most part in a milder form. Towards the end of 1915 lack of transport reduced British sea-traffic to such an extent that the difficulties due to the interruption in British foreign trade were rendered more acute by the steady rise in the price of imports. Market prices followed suit. The financial situation, too, became disquieting owing to the drain on the country caused by the military and political situation.

3. A new U-boat campaign would be undertaken under much more favourable circumstances than that of February, 1915, because the amount of tonnage still available for British imports and exports cannot stand much further diminution, as in that case the transport of essential goods will suffer, and because England has been robbed of the better part of her power of resistance by shortage, rise in prices and financial overstrain. Moreover, a new U-boat campaign has such weapons at its disposal that it-is in a position to achieve considerably more from a military point of view than last year's campaign, for though the enemy has increased his defensive power the U-boats are equipped with a number of new technical improvements.

4. If on this basis the U-boat campaign has to be carried on with the same restrictions of a non-military nature as last year no doubt England's economic, and consequently also her financial, position will be further damaged. But it cannot be assumed with any certainty that in this way England will be forced to make peace, partly because of the many difficulties of carrying out a U-boat campaign with such a limitation of its specific activities, and the consequent greatly increased possibilities of defence, but especially because, judging by last year's experience, the effect of terrorising shipping is to all intents and purposes lost.

5. But if a new unlimited U-boat campaign is inaugurated on the principle that all shipping in the War Zone may be destroyed, then there is a definite prospect that within a short time, at most six months, England will be forced to make peace, for the shortage of transport and the consequent reduction of exports and imports will become intolerable, since prices will rise still more, and in addition to this England's financial position will be seriously threatened. Any other end to the war would mean grave danger for Germany's future economic life when we consider the war on German trade that England has planned and from which she could be deterred only by such a defeat as the U-boats could inflict.

6. The United States are not in a position to lend England effective aid against a new U-boat campaign by providing her with tonnage. In view of the ever-increasing burdens imposed by the war, it is not to be supposed that the United States will afford England financial support for an indefinite period. Such support would, moreover, be of no avail in an unrestricted U-boat campaign against English trade, as it could not prevent a scarcity of essential goods or make it possible for the English to carry on their export trade.

The proposal made by the Chief of the Naval Staff in January, 1916, to start an unrestricted U-boat campaign was based on the following estimates of success:

(a). From the beginning of the U-boat war in 1915 till the end of October of that year in the War Zone round England one or two steamers, averaging 4,085 tons, were sunk daily by each U-boat; this does not include steamers of less than 1,000 tons. It could, therefore, be assumed that in the future each U-boat would sink ships amounting to at least 4,000 tons daily. If it is reckoned that in a month only four stations are continuously occupied—a very low estimate in view of the increase in the number of U-boats during 1915 then you get a total of 6,000 tons a day, or 480,000 tons a month, in the War Zone round England.

(b). In the Mediterranean in the second half of the year 1915 an average of 125,000 tons of shipping was sunk every month. Assuming that traffic did not materially fall off, as a result of the U-boat campaign, and that in the course of the summer of 1916 the number of stations in the Mediterranean would be further increased, the same result might be counted on; that is, 125,000 tons per month.

(c). The amount of tonnage destroyed by mines had averaged 26,640 tons a month. The same number could be assumed for the future. This would bring the total result per month up to 631,640 tons, which would mean a complete loss of 3,789,840 tons in six months. But the effect of this loss upon English trade and economic conditions must be measured by a multiple of this figure, because every lost ship would affect imports and exports, and would, moreover, have made several journeys in six months. The total tonnage of the English Mercantile Fleet at the outbreak of war amounted to 20 million tons in round numbers. Judging by the rise in prices which became manifest a few weeks after the opening of the U-boat campaign, an idea can be formed of what the effect would be if more than a third of England's total tonnage were completely lost, when it is considered that England is dependent on it to supply her manifold wants and keep up her widely extended business connections. There could then be no question of " business as usual."

But the Imperial Government rejected the admiral's suggestion. So the Chief of the Naval Staff resolved to content himself with a kind of payment on account, which consisted in treating all armed enemy merchantmen as warships. But he did not give up all hope of soon being able to take up the U-boat campaign in its intensest form.

When in January, 1916, I took over the command of the Fleet I considered it my first task to ascertain what weapons against England lay at my disposal, and especially to make sure whether, and in what way, the U-boat campaign against English trade was intended to be carried out. On February 1 the Chief of the Naval Staff assured me that the unrestricted U-boat campaign would be inaugurated on March 1. All preparatory work for the operations of the Fleet were based on this assumption. As early as February 11 the officers in command of the Fleet received the order as to the treatment of armed merchant vessels. According to this order enemy merchantmen armed with guns were to be looked upon as warships, and to be destroyed by all possible means. The commanders were to keep in mind that mistakes would lead to a break with neutral Powers, and therefore the sinking of a merchant vessel on account of its being armed might only be proceeded with when the fact that it carried a gun had been positively ascertained. In view of the warning to neutrals, which was to be conveyed through diplomatic channels, this order was not to come into force until February 9.

The Government again issued a memorandum about the treatment of armed merchantmen. In this they explained at length that in view of the instructions issued by the British Government, and of the consequent conduct of English merchantmen, enemy merchant ships that were armed no longer had the right to be regarded as peaceful trading vessels. The German Government notified neutral Powers of this state of affairs, so that they might warn their people in future not to entrust their persons or their fortunes to armed merchantmen belonging to any of the Powers at war with the German Empire. After this explanation no neutral State could demand that its citizens should be entitled to protection if they travelled on armed enemy steamers into the War Zone.

We expected that in these circumstances there would be fewer difficulties in carrying out the U-boat campaign, while paying due consideration to neutral shipping. But if, as the Chief of the Naval Staff had told me, it had been decided to open the unrestricted U-boat campaign on March 1, it was not clear why this declaration relative to the treatment of armed steamers should have preceded it. My suspicion that the date of March 1 would not be adhered to was confirmed on the occasion of H.M. the Emperor's visit on February 23, of which I have given an account in an earlier chapter. The Emperor shared the political doubts which the Government had advanced, and wished to avoid a break with America. This announcement of the Government had received the assent of the Naval Staff, which was responsible for the war at sea, and so of course those in command of the Fleet had to submit to the order to resume the campaign against English trade with a few U-boats.

We would try this first and await the result. Judging by the assurance given me, I took it for granted that the Government had learnt a lesson from the events of 1915, and that it would not again give way if objections were raised, but would on the contrary then proceed with the intensified form of U-boat warfare. We had far greater means at our disposal now to give emphasis to our threats.

I should like to point out here that those in command of the Fleet had no right to exercise a decisive influence on the conduct of the war, but the Chief of the Fleet, being responsible for the execution of orders, could make representations if he found the conditions imposed on him too-disadvantageous. Added to this, the Fleet had only some—about half—of the U-boats at its disposal; the rest were in part attached to the Naval Corps, and in part under the orders of the Commander-in-Chief of the Baltic; those in the Mediterranean took their orders direct from the Naval Staff. But the problem of the U-boat campaign was so closely connected with the combating of the English Fleet—our own Fleet's main task—that it became a matter of the greatest importance in its effect on the decisions of the Navy. I therefore thought it my duty to point out the difficulties which would arise in our conduct of the war in every sphere, if the U-boat campaign were prosecuted on principles that were militarily unsound; all the more so as I was accountable to the U-boats under my orders, if they were assigned to tasks which would in the long run entail their destruction without their having achieved the success which they promised to do if rightly wielded as a weapon.

From this point of view I endeavoured to combat the tendency to give way, which the Chief of the Naval Staff betrayed when dealing with political objections, although in a long and well thought-out memorandum he, as the proper representative of the naval fighting forces, had shown that unrestricted U-boat warfare was the best and safest means we possessed to subdue England and generally to bring the war to a successful close.

On March 4 the decisive session at General Headquarters took place, and the Chief of the Naval Staff informed me of the result as follows:

"For military reasons, the unrestricted U-boat campaign against England, which alone promises full success, must begin without fail on April 1. Till then the Imperial Chancellor must set in motion all political and diplomatic machinery to make America clearly understand our position, with the aim and object of securing our freedom of action. Up to that date the U-boat campaign shall be carried on against England as effectively as possible in conformity with the orders issued on March 1."

The following considerations were the means of bringing about this decision at the discussion on March 4:

"The general military situation is good. East and west we hold the territory that we have victoriously won. No serious danger is to be apprehended from America so long as our U-boats and Fleet remain afloat. Austria is effectively repulsing Italy's attempts at attack; Bulgaria has a firm hold on Serbian territory; the Salonika campaign is doomed to come to a standstill; the Russian offensive against Turkey has come to a stand on the Erzerum—Trebizond line; the English expedition in Mesopotamia has ended in a heavy defeat; Egypt is threatened from the direction of Syria and by the Senussi, which means that a considerable British army of defence must be kept there. Latterly, too, military forces have had to be sent to Ireland. No essential change in the favourable general military situation is to be expected, nor on the other hand is there any prospect of a decisive victory of all our forces.

"From the economic point of view the fact that we are cut off from all imports from overseas and neutral countries becomes increasingly apparent; even a good harvest cannot bring security for the future, as long as England's policy of violence, whose object is to starve us out, is not stopped. Thus the economic conditions are very different from the military. Our opponents can hold out longer than we can. We must, therefore, aim at bringing the war to an end. We shall not be mistaken in assuming that an injury inflicted on England, which induces her to regard the conclusion of peace as better business, can force the others to peace as well. England can only be injured by war on her trade. The only means to inflict this injury is a ruthless U-boat campaign, the effects of which England will not be able to withstand for more than six or eight months if she cannot get assistance from others than her present Allies. Ruthless U-boat warfare will not only inflict damage on England; neutral shipping will also feel the full brunt of it, and cargoes and lives will be imperilled. The small neutral States must give in and are willing to do so: that is, to stop trade with England. America opposes this manner of waging the U-boat campaign, and threatens us with war. From a military point of view, and especially from the standpoint of the Fleet, we might well risk this war. But economically it would fatally aggravate our situation. Such a rich and distant country could stand the war for ten years or more. But it would afford our flagging opponents very considerable moral and material support which would enable them, including England, to hold out for a longer period. Our aim, which is to bring the war to an end within a short time, would be farther than ever from realisation, and Germany would be exposed to exhaustion.

"As the present military situation is not such as to force us to stake everything on one throw of the dice, our superiority in the field must be maintained, and at the same time our diplomatists must do all in their power, first to prevent us from making new, dangerous enemies, and then to find ways and means of sowing discord among our present enemies and thereby open a prospect for a separate peace. If we succeed in keeping friends with America, and at the same time, by concessions in our manner of conducting the U-boat campaign, can induce her to exert strong and effective pressure on England, so that the legitimate trade of neutrals with the belligerents is re-established, then we shall obtain the economic aid which will enable us to maintain our favourable military situation permanently, and so to win the war. A break with America certainly affords us the tactical advantage of ruthless U-boat warfare against England, but only under conditions that will prolong the war, and will certainly bring neither relief nor amelioration to the economic situation. Should the attempt to keep America out of the war fail, it will still be our lot to face these conditions. We cannot take the responsibility of neglecting to make this attempt, for the sake of a few hundred thousand tons of enemy shipping that we might sink during the time the attempt is being made.''

These attempts met with no success whatever; certainly not within the period set aside up to April 1. Neither was the assumption fulfilled that we might exert pressure upon England through the agency of America, so as to re-establish legitimate trade with neutrals, and thereby obtain the economic aid which would enable us to maintain our favourable military situation permanently. As soon as this was recognised we were confronted with the necessity of drawing the inevitable conclusions, and of beginning the economic war against England in its intensest form. Otherwise the dreaded state of affairs spoken of at the session of March 4 would become a reality, and our opponents would be able to hold out longer than we could if no change occurred in the economic situation. The dullest must have been forced into some recognition of this, when on April 20, in connection with the Sussex incident, America presented her threatening Note.

The date of April 1 had passed, and still the unrestricted U-boat campaign had not been started. But the leaders of the Fleet had no special reason for urging an early start, as the U-boats then at sea had not gathered sufficient experience on the basis of which we might make counter proposals.

On March 24, 1916, the steamer Sussex, with 300 passengers on board, among them being a number of American citizens, was torpedoed in the Channel while crossing from Folkestone to Dieppe. So far as German observation went, it was not made clear at first whether the steamer had been hit by a U-boat, or had struck a mine. Certainly a ship had been torpedoed on that day and in that neighbourhood, but the German commander, judging by the circumstances and the appearance of the ship, took it for a minelayer of the new "Arabis" class. The American Government took occasion, in consequence of this incident, to send a very sharp Note to the German Government, protesting against the wrongfulness of the submarine campaign against commerce. It threatened to break off diplomatic relations with Germany if the German Government did not declare the abandonment of its present methods of submarine warfare against passenger and merchant vessels, and see that it was carried out.

As a result of this Note, presented on April 20, 1916, our Government decided to give in and sent orders to the Naval Staff to the effect that submarine warfare was henceforward to be carried on in accordance with Prize Law. This order reached the Fleet by wireless telegraphy when it was on the way to bombard Lowestoft. As war waged according to Prize Law by U-boats in the waters around England could not possibly have any success, but, on the contrary, must expose the boats to the greatest dangers, I recalled all the U-boats by wireless, and announced that the U-boat campaign against British commerce had ceased.

On April 30 I was informed by the Naval Staff that His Majesty approved of the interruption of the U-boat campaign against commerce ordered by the Commander of the Fleet, and he directed that the U-boat weapon should meanwhile be vigorously used for military purposes. The order to resume the U-boat campaign against trade would be given when the political and military situation should demand it.

Having U-boats at my disposal for military purposes gave me the desired opportunity of extending the operations of the Fleet, and it was owing to this circumstance that the Fleet had occasion on May 31 to meet the English Fleet in battle near the Skagerrak. To my idea the moral impression which this battle left on the neutral nations created a most favourable atmosphere for us to carry on the war against England by all possible means, and to resume the U-boat campaign in all its intensity. I took the opportunity of submitting this view to H.M. the Emperor, when he visited the Fleet at Wilhelmshaven on June 5.

In May the Naval Staff had again begun to try to persuade the leaders of the Fleet to change their mind and resume the U-boat campaign in accordance with Prize Law, so as to be able to inflict at least some injury on England. But as even the regulations as to the treatment of armed steamers had been rescinded, I refused to contemplate a resumption.

In June, soon after the battle, the Naval Staff again returned to this subject, and on June 20 invited me to state my point of view in order to incorporate it in a memorandum to be presented to the Emperor. I replied that in view of the situation I was in favour of the unrestricted U-boat campaign against commerce, in the form of a blockade of the British coast, that I objected to any milder form, and I suggested that, if owing to the political situation we could not make use of this, our sharpest weapon, there was nothing for it but to use the U-boats for military purposes. A few days later the Chief of the Naval Cabinet thought to persuade me to change my attitude. He wrote me the following letter on the subject, dated June 23, from General Headquarters:

"The Chief of the Naval Staff has given me your letter to read on this subject; its conclusions may be summed up in the words, 'Either everything or nothing.' I can fully sympathise with you in your point of view, but unfortunately the matter is not so simple. We were forced, though with rage in our hearts, to make concessions to America, and in so doing to the neutrals in general, but, on the other hand, we cannot wholly renounce the small interruptions of trade that it is still possible for us to carry out, which are proving of considerable value, too, in the Mediterranean. It is the thankless task of the Chief of the Naval Staff to try and find some way of making this possible in British waters as well. And it is my opinion that the Chief of the Fleet should assist him in this as far as in him lies, by bringing about a compromise between the harsh professional conception of the U-boat weapon and the general, political and military demands which the Chief of the Naval Staff has to satisfy. Of course, to that end it is necessary that the Chief of the Fleet should unreservedly acknowledge the decisions of the All Highest with regard to the limitation of the U-boat campaign, as the result of the most serious deliberation upon the military, political and economic situation. This is, of course, merely what is to be expected of him as a soldier. And further, that he should pledge himself to make use of the U-boat as a weapon, despite the limitations imposed, in order in the first place to injure, or at least continually to threaten, the import trade of England. I do not take it upon myself to offer any suggestions on the way in which such use can be made of the U-boats, especially as I know it is a far more difficult matter near the English coast than it is in the Mediterranean.

"What I ask of you is merely this: that you should personally try to arrive at some understanding with the Chief of the Naval Staff which will lead to some positive result, and by so doing put an end to a situation in which His Majesty might be forced to issue commands instead of merely approving; as, for instance, if he should order so many more U-boats to be given up for use in the Mediterranean, as offering a more fruitful field for the U-boat campaign against commerce.

"In conclusion, I should like to remark that for my part I still believe in the possibility of a ruthless U-boat campaign. The conflict between America and Mexico, the growing bitterness of the neutrals on account of England's blockade, increasingly good prospects for the harvest, and last but not least our successes on both fronts—all these are matters which tell in favour of such use of our U-boats, without involving us in an uncertain political adventure.

(Signed) v. MULLER."

I replied that nothing more could be expected of me than that I should express my honest conviction, especially as it was in connection with new and far-reaching decisions to be taken by the Emperor that my opinion on the subject was asked.

On his visit on June 30 the Imperial Chancellor gave me the impression that he had not the slightest intention of employing against England all the weapons at our disposal, but also that he would not give his consent to an unrestricted U-boat campaign, so as not to be faced with fresh troublesome incidents. The course of events hitherto had shown that America interfered on England's behalf as soon as the U-boat campaign began to have perceptible results. For ever so long America had systematically prevented us from using our most effective weapon. Our attitude gave our people the false impression that, despite America's objections, we were still going to use our U-boat weapon with all our might. The people did not know that we, pledged to the nation by our big talking, were only pretending to carry on the U-boat campaign, and America laughed because she knew that it lay with her to determine how far we might go. She would not let us win the war by it. So we did not wield our U-boat weapon as a sword which was certain to bring us victory, but, as my Chief of the Staff, Rear Admiral von Trotha, put it, we used it as a soporific for the feelings of the nation, and presented the blunt edge to the enemy. Gerard was right; he never wanted a war between America and Germany —but he wanted our defeat. That suited his book ever so much better.

If we review the course of development of our policy from January, 1916, we find that it had zigzagged in the following manner:

1. On January 13, 1916, the Naval Staff declares: If the U-boat campaign is to achieve the necessary success it must be carried on ruthlessly.

2. On March 7, 1916: Decision of His Majesty's, passed on by the Naval Staff: For military reasons the inauguration of the unrestricted U-boat campaign against England, which alone promises full success, is indispensable from April 1 onward.

3. On April 25, 1916: We are to carry on the war against trade absolutely according to Prize Law, consequently we are to rise to the surface and stop ships, examine papers, and all passengers and crew to leave the ship before sinking her.

4. On June 30, 1916: The Imperial Chancellor informs the Commander of the Fleet that he personally is against any unrestricted form of U-boat campaign, " which would place the fate of the German Empire in the hands of a U-boat commander."

5. At the same time a proposal from the Chief of the Naval Staff: The war against merchant ships to be carried on in the following manner: They are to be approached under water to see whether they are armed; if they are not armed, the boat is to rise to the surface at a safe distance, examine papers, and sink the ship when the crew is in safety.

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