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General Freyberg to the Minister of Defence

It is most difficult at the moment to make any appreciation, but it is necessary to do so for administrative purposes.

After extensive preparations for the invasion of the United Kingdom Germany has suffered her first big reverse with loss of prestige and considerable material damage. She has also wasted vital campaigning months; the Axis made a great mistake in missing the opportunity of capturing Egypt in July when it was practically unprotected. The position in the Middle East is now much better; all classes of Army and Air Force equipment arrived in October and the volume of supply is increasing.

As for the present German position, their Army is reported to be restless and dissatisfied. Crop failure in 1940 and the prospect of a bad crop in 1941 may cause serious disturbances and internal security problems throughout Europe. It is reported that Germany's page 192 present oil supplies will become inadequate by June next. Germany realises that success in any particular theatre will not conquer the British Empire and now sees no quick way of winning. In order to achieve the aim of smashing the British Empire Germany must therefore in the immediate future obtain wheat and oil supplies for a long war.

There appear to be two courses open to Germany: either to break through Turkey and secure Basra and Mosul oil or turn on the Russians and get Ukraine wheat and Baku oil. Opinions favour the former course but at present a forecast is difficult.

As far as developments in the Balkans situation are concerned, Roumania is now suppressed, Yugoslavia is not able to resist German pressure, and Bulgaria, pro-Axis, has just moved an army to the Turkish frontier. Her gallant resistance, although encouraging, may not prove sufficient to save Greece and we cannot at this stage send troops. If air bases on the eastern coast of Greece are obtained by the Axis it will hinder British ships using the Aegean Sea and the Dardanelles. Russia holds the key to the Balkan situation. An authoritative report asserts a Russo-German agreement to cut up Turkey, Russia to be given control of the Bosporus and the Dardanelles and a free hand in Iran, Germany to take Mosul. Turkey is a loyal ally and will undoubtedly resist if Russia is neutral, but should Russia join Germany, Turkey will capitulate and allow the passage of the German Army. If Turkey resists she will hold Thrace, with the help of bad weather, until the spring. If Turkey gives in and lets the Germans through they can be in Anatolia before the winter. Should Germany attack Russia, and many consider it likely, she may endeavour to isolate Russia by closing the Bosporus and the Dardanelles before the winter.

It is my firm opinion that 1941 is the critical year. A maximum effort will be made by the Axis. Fighting in the Middle East may be fierce and prolonged with the British going to the aid of Turkey in the spring. The Middle East Forces will probably have to face operations either in Thrace or Anatolia in March next. I am doing all I can to hasten equipment for the fighting units, organisation of base training depots, and completion of medical arrangements. It would be prudent to get the 4th and 5th Reinforcements here as soon as possible.

As you know, with the situation changing hourly, an appreciation at a time like this must be continually reviewed. Whatever Russia does, however, the extension of hostilities in the Middle East involving the New Zealand Expeditionary Force must be anticipated by the spring of 1941.

A comprehensive statement regarding the training and equipment of the Division will be sent in a few days.