Croatia
I. State territory (compare the attached sketch) - After the transfer of the Semlin territory from Serbia to Croatia, performed on 10/10/1941, the frontiers towards Serbia are now determined in general.
The frontier towards Hungary is still in dispute, since the Mur Island is kept occupied by the Hungarians. The Mur Island was Croatian possession up to the beginning of the 18th century and then again from 1848-1867, and from 1919-1941 it belonged to Yugoslavia. 98% of its population profess allegiance to the Croatian ethnic group.
The present frontiers coincide approximately with those of old Croatia, Slavonia, Bosnia, Hercegovina, and parts of the coastal regions and of Dalmatia. Considerable parts of the last mentioned territories were ceded to Italy.
Croatia is divided into a German and an Italian sphere of interests. The cooperation between Croatians and Italians is strained.
The population of Croatia amounts today to about five million, whereof nearly two million are Serbs.
II. Government - State Leader (Poglavnik) of the "independent State of Croatia" is Dr. Ante Pavelic. He is assisted by a council of 12 members (Doglavnici); besides by another council of 7 members (Poglavni-Pobocnici).
The acceptance of a king from the Italian royal house is not welcomed by all parts of the people. The Duke of Spoleto is being considered as king, however is not yet elected.
III. Administration - The administration is but in a state of organization and is very much handicapped by encroachments of the Ustasha on the one hand and by revolts of the oppressed Serbians on the other hand. The German military interests are safeguarded by the German General in Zagreb, Brigadier General Dr. H. C. von Glaise-Horstenau.
IV. Armed forces - Minister of War and commander of the Croatian armed forces is Marshal Kvaternik; chief of the General Staff, General of the Air Force Laxa. At present the Croatian Army consists of - 5 division staffs, 46 infantry battalions activated as regards personnel, and 1 bicycle battalion. The 10 activated artillery battalions are not yet fully equipped. Furthermore, there exists 15 infantry replacement battalions. Three cavalry battalions are employed for the most part as infantry units, since there is lack of horses. Three corps staffs, one more division staff, two signal battalions, and four engineer battalions are being activated. The arms are for a great deal material captured by the Germans, and only a small part of the army are trained with them so far.
A Croatian Legion (army, navy and air force units) is attached to the German armed forces for the fight against bolshevism.
V. Internal political situation
a. The Ustasha - Dr. Pavelic established in Italy the organization of the Ustasha (insurgents). In Yugoslavia Eugen Kvaternik saw to a further extension and consolidation of this formerly secret organization.
The goal of the Ustasha was the creation of an independent Croatian national state by uncompromising fight against the Serbs.
According to its organization statute the Ustasha consists of:
The political organization - It has the task to educate the members, to imbue the minds of the whole nation with the Ustasha spirit, and to care for the youth.
The Ushtasha militia (para-military organization) - It is responsible for the pre and post military training, and has also to do some racial education work.
The Ustasha are fanatical enemies of the Serbs. After Dr. Pavelic's accession to power the unbridled attitude of numerous Ustasha men, especially against the Serbian part of the people, was very detrimental to the reputation of the movement. The Ustasha ministry is now doing what is necessary for discipline and for a strict organization of the Ustasha units. They are organized into Stuerme (units corresponding to a company) and are also operating in the insurgent areas under the command of Croatian army officers. There they proved themselves.
b. The Jewish and Serbian problem - There have always been strained relations between the Roman Catholic Croatians and the Greek Orthodox Serbs (Pravoslavs). The young Croatian State at once issued laws according to the model of the Nuernberg Laws concerning Jews, to which Jews and Serbs were subject in like manner. This resulted in most severe persecutions of Serbs, and at some places degenerated into a religious war against the Orthodox Church. Serbs were chased by thousands over the frontiers and thereby robbed of their last property.
c. Insurgent movement - The reasons for the insurrection were the partly artificially intensified animosity towards the Serbs, Communist and English agitation, and the disunion within the Ustasha.
Upholders of the insurrection are undisciplined Ustasha units, Serbian, and Communist bands. The insurrection is kept alive by atrocities, committed on both sides, and by foreign agitators.
Fight against the insurrection - In the Italian sphere of interest, after its being occupied by numerous Italian divisions, the situation is generally calm. In the German sphere of interest Croatian units, partly with German assistance, are fighting the insurrection centers with varying success. Acts of sabotage against railroads and means of signal communication increase in number. In Zvornik (near the Serbian-Croatian frontier) a German battalion successfully defended itself for weeks against continuous enemy attacks. A large scale relief operation is being staged by the Croatians.
Montenegro
Montenegro is an independent kingdom under a King of the Italian royal house. The King was not yet elected, since here, as in Croatia, the people reject the Italians.
In the area of the Sandshak Novi Pazar, all over northern Montenegro as well as near Kolasin, bands with military organizations under the command of Serb General Ljubo Novakovic are fighting against Italians and Croatians. Southern Montenegro is calm. The population complied here with the request of the Italians to deliver up the arms.