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Basically, because they were desperate.

Germany had had a dreadful 1916, fighting simultaneously the battles of Verdun and the Somme, while having to rescue Austria from Russia's Brusilov offensive. Their attack on the British fleet at Jutland had achieved nothing. As far as could be seen, 1917 promised the same only worse, as both the British and Russian armies were likely to be better trained and equipped than the previous year. As Germany had barely survived 1916, it was likely that 1917 would see her defeat.

The German Navy offered a way to break this deadlock. Britain was heavily dependent on imported food and raw materials, and if she could be starved into surrender by Summer 1917, Germany would then be in a position to defeat her other enemies.

This was a high risk strategy, as unrestricted u-boat warfare might well bring the United States into the war on the Allied side. However, the Navy argued that this wouldn't really matter, since the u-boats could sink any troop transports from the US, while in any case an American army large enough to matter could not arrive in Europe before 1918, by which time the war would be over - one way or the other. Their view prevailed, and USW was declared on Jan 31, 1917.

Ironically, it was declared just as Germany was about to get a reprieve. In March 1917 the Tsar was overthrown, and though Russia did not leave the war until December, its army became increasingly ineffective. A few weeks later, the French army was all but paralyzed by a series of mutinies, following the unsuccessful Nivelle offensive. The Allies might well have been obliged to make peace, had US intervention not given them new hope.

The Germans were correct in their expectation that the US Army could not play any major role in 1917, but mistaken in assuming that the war would end that year. The Russian Revolution averted German collapse, whilst the submarine campaign did not live up to expectations. This was for a number of reasons. Firstly, US intervention provided Britain with additional destroyers for use as convoy escorts, and allowed her to begin introducing the convoy system. This greatly reduced her losses to the u-boats, which initially had been horrendous, (in April 1917, every fourth merchantman sailing had been sunk). When Admiral Sims arrived in London, he learned that Admiral Jellicoe and others thought that if present trends continued, Britain would be starved into surrender by November. In particular, the Royal Navy was in danger of being crippled by shortage of fuel oil. However, by September 1917 the crisis was essentially over.

In addition to the convoy system, US intervention helped defeat the U-boats in other ways. Several South American and other countries entered the war along with America, and German ships trapped in their ports (40 in Brazil alone) passed into Allied hands. Also, neutral merchantmen in Allied ports, refusing to sail fo fear of u-boat attack, could now be seized, as without US support, the remaining neutrals were too weak to object, and had essentially no one left to trade with except the Allies. Finally, US shipyards produced 800,000 tons of merchant shipping in 1917 (more than double the 1916 figure) and 2.6 million tons in 1918, so that losses to u-boats could now be replaced.

It is interesting, if futile, to speculate on what might have happened had Germany followed the advice of Chancellor Bethmann-Hollweg, and proclaimed unrestricted warfare against armed merchantmen only. This would have been acceptable to President Wilson, and almost certainly have averted war with the US, while, since most Allied merchantmen were already armed or in process of being, would have made little difference as far as Allied shipping was concerned. However, the Navy objected because they wished to frighten neutral ships away from Allied ports. In the event (see above) this aim completely backfired.

In short, unrestricted u-boat warfare made a degree of sense at the time, but in the end brought Germany to defeat.

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Q: Why did Germany introduce unrestricted submarine warfare during World War 1?
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