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for a long period) would lose us our position in S. E. Europe, in Palestine and Trans jordan and throughout the Arab world.

It would complicate our position in India and would increase the temptation to which Japan is subject to attack our Far Eastern possessions.

Effect on the Economic Position of Germany and Italy.

10.

Although we should still be able to prevent supplies from entering the Mediterranean from outside, the withdrawal of the fleet would enable Italian and German trade to the carried on between the Black Sea, Turkey and the Balkans, although we might achieve considerable interruption by submarine operations. We are now achieving scme success in the pre-emptive purchase of Balkan raw materials, a system which would collapse completely if the fleet were withdrawn. If we lost control of sources of supply in Egypt and Iraq, the effectiveness of our blockade would be seriously prejudiced.

Conclusions.

11. In our opinion, the withdrawal of the fleet from the Eastern Mediterranean is, essentially, a question of balancing the naval advantages against the grave and certain military, political and economic disadvantages of such a course. We do not consider that the withdrawal of the fleet is, at present, a vital necessity from the naval point of view. On the other hand, its withdrawal might have the most serious effect on our ability to exert economic pressure, might eventually result in the loss of Egypt and Palestine, and might have the gravest consequences in India and throughout the Middle East. The effect on South Africa, Australia, New Zealand and India might be discouraging. The withdrawal of the fleet might, under present conditions, be regarded in the East as the first stage in the abandonment of our Imperial position. Even if we recovered that position later as the result of a victory in Europe, the blow to our prestige might not be easily forgotten.

12. If we keep the fleet in the Eastern Mediterranean, the Italian fleet might be forced under German pressure to leave the Mediterranean to work from French, or possibly Spanish ports, with the object, in conjunction with German naval forces, of obtaining the temporary command of the sea and of the English Channel.

Should this occur our fleet in the Eastern Mediter- ranean would be in no position to intervene,

13. We feel that, at the present moment, the political, economic and military reasons for retaining the Fleet in the Eastern Mediterranean outweigh the purely naval reasons for its withdrawal.

Cabinet War Room.

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