-5-   #4294, August 1, 10 p.m., from London
 
 
He stated that nearly one half of Russia's pig iron and steel production has gone "and we can hope
to have only ten million tons a year against forty million which Germany and her satellites now
have.
     We have lost three fourths of out aluminum production, besides suffering a reduction of
output in other industries.  We are bound to rely more than before on imports and that entails
transport difficulties which have recently become acute".
     The Ambassador remarked that the U.S.S.R. has lost a wide net of railways, lowering the
Red Army's mobility while the captured railways have increased the mobility of the German
armies.
     He said that if the transport of oil from the Caucasus becomes more difficult the general
situation will further deteriorate.
     "In 1943 Germany may be in a position considerably to limit the number of troops she is
bound to keep in the U.S.S.R.", he said, "and would be able to transfer many forces to the west. 
British and American forces, instead of facing second and third rate German divisions now
stationed there, will have to cope with a great number of first class seasoned troops.  Allies air
superiority in the west would be reduced or would disappear.