I beg to report that in the course of a conversation which I had yesterday with Dr. Rüter,¹ he said that the German Foreign Office felt that they had been relieved of a certain amount of worry in that the United States Government had included Ireland in the 'war area'. It seems that Germany was afraid that, if our west coast were declared not to be in the war zone, munitions and other contraband goods would be consigned by United States firms to Great Britain through Ireland.

The German Minister at Dublin has reported home that timber from Baltic countries has been imported into Northern Ireland through Dublin. I believe that he also brought the matter to your attention. The Germans would, of course, like us to prohibit transactions leading to the re-export of contraband. Their control ships have so far let ships bound for Ireland through without delay, but if the re-export of wood continues they will have to be much more strict in future.

I hear that you have suggested a 'clearing' arrangement for payments between the two countries. Dr. Rüter was none too sure that this would be practicable, as our dealings in foreign currency have until now been conducted through London. I said to him, however, that at least two of the Irish banks have always had connections with the Guaranty Trust of New York, and that direct dealings with Holland or Switzerland could be established. The question of transfer would arise in any case, whether or not a 'clearing' was negotiated.

Before the outbreak of war, Dr. Rüter was in charge of the section dealing with trade with members of the British Commonwealth of Nations. At present he is mainly engaged in studying the economic measures taken in these countries, and in considering plans to combat the British blockade. The position with regard to Egypt and Irak is not at all clear. While both countries have broken off diplomatic relations with Germany, neither of them appear to have actually declared war, so that it is not certain whether goods consigned, say, to Alexandria may be regarded as goods consigned to an enemy.

It is hoped to turn most of the trade of the Balkan and Scandinavian countries to Germany. At present it is difficult for them to trade with anyone else.

Germany feels that she can eventually control a large portion of the total European trade. She is ideally situated for this purpose, and is undoubtedly the great industrial and commercial country on the Continent; she considers that she has a right to the leading place.

Ever since the end of the Polish campaign there has been an air of unreality about war from the military point of view, as nothing much is happening in that line, but those responsible for the country's economic adaptation to the new circumstances are working literally night and day. Officials of the Foreign Office state that the effects of the British blockade have been minimised, and that Germany can hold out for an indefinite period in a trade war.