I have to wholeheartedly agree with you there. The Baltic is the only sea that I can see Germany being able to really hope to dominate realistically, and yet they fell far short.
No they did not. Soviet naval threat was rapidly contained in co-operation with Finland. KM did it's job quite well, as the Army did not have Leningrad as it's goal there was no hope of doing a better job. The one sea where German effort fell far short of possibilities was the Black Sea. With more effort put into littoral capabilities which could have been ferried via Danube the supply capabilities for AG South could have been much improved and there would have been even opportunities for amphibious flankings.
As for the Atlantic, outside of forcing the Allies to do convoying and keeping some heavy units out of the Med and Pac I think everything else was ultimately a waste. Less subs, less large surface craft, more AMC's.
Where Germans should have been focusing on, would have been, IMHO, designs which could be deployed via inlands waterways either as modules or full units. Probably even Torpedoboote could have been delivered to Black Sea if designed from the start to for this method of delivery.
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