(Part 2. In continuation of telegram No. 190)
DANUBIAN AND BALKAN COUNTRIES
Failure to save Finland has undoubtedly created most unfortunate impression in these countries and German efforts to exploit opportunity are inevitable. Unless Allied propaganda and diplomacy immediately intensified and definite plan prepared for counter- action in case of a German move there is a danger that all this area with its valuable supplies particularly oil from Rumania will come under German dominance.
With regard to (b) no general appreciation has been prepared of possible political and military developments, nor has diplomatic action necessary to forestall them or to meet them should they arise been determined on; nor, in the event of military action apart from the Western Front, have detailed plans necessary if immediate counteraction is to be taken been prepared.
For example-everything points to the possibility that if Germany cannot obtain all the oil supplies she wants from Rumania she will take military action to obtain them. Notwithstanding this fact while denying Rumanian oil supplies to Germany either by purchases, pressure on oil companies or diplomatic representations to the Rumanian Government, the Allies have not pursued an equally energetic diplomatic policy, particularly with Turkey, in an attempt to ensure adequate help to Rumania in case of attack nor have necessary details of plans been prepared as to how that help could be given, if at all.
Summarized, the Allies are leaving all the initiative to Germany and having done so are in great measure trusting to improvised methods of countering any moves when they occur.
In my view that can only lead to more Finnish episodes and probably in the end if not to disaster to a prolongation of the war.
The reason for the existing absence of policy direction and drive is the lack of a small, efficient War Cabinet freed from departmental responsibilities and minor policy questions devoting all its time to high war policy.
I have been and am continuously representing the points indicated above but with little success. Waterson, the South African High Commissioner, and I are in agreement as to general situation (though I have not discussed with him my views as to smaller War Cabinet) and both feel that it is most desirable and [sic] that you and Smuts  should be advised of the position as we see it.
He is cabling Smuts today down similar lines and advising him that I am cabling you.