On August 19, 1915 the U-24 sank the Arabic, outward bound for the USA, 50 mi (80 km) south of Kinsale. The Arabic was zigzagging at the time, and the commander of U-24 said that he thought she was trying to ram his submarine. He fired a single torpedo which struck the liner aft.
She sank within 10 minutes, killing 44 passengers and crew, 3 of whom were American. On August 22 U.S. President Wilson's press officer issued a statement to the effect that the White House staff was speculating on what to do if the Arabic investigation indicated that there had been a deliberate German attack. If true, there was speculation that the U.S. would sever relations with Germany, while if it was untrue, negotiations were possible.
At the same time, U.S. Secretary of State Lansing approved Assistant Secretary Chandler Anderson's suggestion for a meeting with German Ambassador Johann Heinrich von Bernstorff to explain informally that if Germany abandoned submarine warfare, Britain would be the only violator of American neutral rights. Anderson met Bernstorff at the Ritz Carlton Hotel in New York and reported to Lansing that Bernstorff had immediately recognized the advantage of making Britain responsible for illegal acts unless Britain ended its war zone.
Following the Arabic incident, German Chancellor Theobald von Bethmann-Hollweg and Foreign Secretary Gottlieb von Jagow decided to tell the Americans about their secret orders of June 1 and June 5, which instructed submarine commanders not to torpedo passenger ships without notice and provisions for the safety of passengers and crew, and on August 25 Bethmann-Hollweg informed U.S. Ambassador James W. Gerard about the June orders.
Bethmann-Hollweg and von Jagow also sought the Kaiser's approval to spare all passenger ships from submarine attack. This proposal angered the German admiralty, Alfred von Tirpitzo ffering to resign his post as Naval Secretary. The Kaiser rejected Tirpitz's offer and supported Bethmann and on August 28 the Chancellor issued new orders to submarine commanders and relayed them to Washington. The new orders stated that until further notice, all passenger ships could only be sunk after warning and the saving of passengers and crews. In his note to Bernstorff, Bethmann instructed him to negotiate as follows:
- Offer Hague arbitration for the Lusitania and Arabic incidents
- Passenger liners to be sunk only after warning and saving of lives, provided they do not flee or resist
- U.S to endeavour to reestablish free seas on the basis of the Declaration of London.
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