Following is appreciation of the Chiefs of General Staff prepared in response to your telegram of 26th January :
Part 1. Principal British strategical interests in the Middle East are, firstly, sea route through the Mediterranean, Suez Canal and the Red Sea whose security depends on the defence of Palestine and Egypt and of fleet base at Alexandria, secondly, the Anglo-Iranian oilfield, thirdly, security of North-West frontier of India which is largely dependent on the existence of friendship of and stable Government in Afghanistan. Fourthly, we have treaty commitments to Turkey and Iraq.
Part 2. Germany has initiative and may advance into the Balkans with Aegean coast or Bosphorus and Dardanelles as her objective.
Possibility of Italy joining Germany cannot be excluded. She could interfere with our sea communications and might attack Egypt and the Sudan. Russia may advance, either alone or in conjunction with Germany, into Roumania and further southward. Russia may also stir up trouble and perhaps advance into Iraq, Iran or Afghanistan.
Part 3. We are preparing to counter the enemy's initiative, whatever form it takes. We should best defend our interests by defeating enemy advance on the frontier of Turkey and Iraq. At the same time we have not sufficient fully trained and equipped forces to [lock]  up in the Middle East numbers required to meet all potential threats. Our reserves must be kept fluid and our further preparations in the Middle East are therefore at present confined to administrative development on scale sufficient to maintain forces likely to be required. In the meantime we are also using the Middle East as training ground.
Part 4. We visualize employment of Australian troops as follows.
If, when they are fit to take the field, situation should require their active employment in the Middle East, we should wish the Australian Government to agree to that course. If, on the other hand, the situation in the Middle East at that period was quiet we should wish to complete their equipment in France or the United Kingdom and employ in France. It is not our intention to employ on internal security duties in Palestine, but their very presence in the vicinity is expected to have salutary effect which will permit internal security duties to be carried out by smaller or less well trained forces than at present.
Part 5. Can not give at this stage any anticipated rate of provision of modern weapons and equipment. A very reasonable training scale of these has already been provided and it is the intention to increase this to war establishment scale at least one month before units will be considered as available for an expeditionary force.
Following are additional views of Chiefs of the General Staff conveyed in long conversation with Ironside. 
PART 2. Chiefs of the General Staff (1) do not consider German move in Danubian and Balkan countries probable in Spring. Reasons- difficulty of military operations and large number of troops necessary to employ. To me this is not convincing and in my view probability of such a move must be kept constantly in mind; (2) consider Italian intervention on the German side unlikely. In my view probably sound but the whole position might be completely altered by German move attended by spectacular successes in the Danubian Balkan countries; (3) consider Russian move unlikely owing to preoccupations in Finland which would intensify in the event of Allied action in Scandinavia. Dominion Office cables to Whiskard  of 3rd February and 8th February in my view probably right but whole position changed if Russia overwhelmed Finland.
PART 3. In my view first sentence correct in respect to the Middle East but not to Danubian and Balkan countries. I am pressing the question of what are Allies plans to meet the situation if Germany moved against these countries.
Russian move in the Near or Middle East or actual military cooperation between Germany and Russia resulting from Scandinavian position regarded as development that can be met, e.g., intensive air action against Baku resulting in serious dislocation of oil supplies.
PART 4. Ironside strongly emphasized last sentence. Actual field of employment impossible to forecast at the moment and might in the event of move in the Danubian or Balkan countries be Near East or even Scandinavia should the position develop there.
Question would be one for consultation with the Australian Government in the light of circumstances at the time.
PART 5. Ironside stated that Australians regarded as the best troops available and when ready for utilization would be given absolute priority in supply of modem weapons and equipment.