Since the last declaration of the enemy Government, which from intelligence information was anticipated, the submarine campaign against merchant shipping of all Nations has resolved itself into the real issue of the war and, stated briefly, the Allied Governments have not been able to, and are not now, effectively meeting the situation presented. 4. As stated in my first despatch, the communications and supplies to all forces on all fronts, including Russian, are threatened, and the "Command of the Sea" is actually at stake. 5. My own views of the seriousness of the situation and the submarine menace have been greatly altered. My convictions and opinions, as probably those of the Department also, had been largely based upon Press reports and reports of our Attachés and other professional Americans who have been abroad during the War. All of this information has been either rigidly censored or else has been given out in such form that it would be of minimum assistance to enemy _moral_. 6. The necessity for secrecy, which the British Government has experienced, and which I repeatedly encounter in London, and even in the Admiralty itself, is impressive. There have been remarkable and unexpected leakages of information throughout the war. Certain neutral legations of smaller countries are now under strong suspicion. 7. The extent to which the submarine campaign is being waged is in itself excellent evidence of the importance attached to it by the enemy, and of the degree to which they counted, and still are counting, upon it. The Intelligence Department has reliable information (as reliable as can be) that the enemy really reckoned that the Allies would be defeated in _two_ months through shortage of supplies. 8. With improved weather and the shorter nights now coming on we may expect even more enemy submarine success. 9. The Commander-in-Chief of the Grand Fleet was yesterday in conference in the Admiralty as to what greater extent destroyers and auxiliaries of the Fleet may be utilized without endangering its power in the remote possibility of another fleet engagement. The consensus of opinion seems to be that the latter will not occur, but there is not complete unanimity in this belief, and of course, in any case, the possibility must be adequately and continuously provided against. _General discussion of situation_: 10. I delayed [four days] forwarding my first report of the situation with a view of obtaining the maximum information consistent with the importance of the time element. I was also somewhat deterred by a natural reluctance to alter so radically my preconceived views and opinions as to the situation. 11. The evidence is conclusive that, regardless of any enemy diversions such as raids on our coasts or elsewhere, the critical area in which the war's decision will be made is in the eastern Atlantic at the focus of all lines of communications.