On the following day, while the left task force moved south, the center task force regained the road and pushed down to the Kuola River. The division also committed the third regiment in the river crossing and assault on Salla. The crossing of the river was set for July 6.
The SS Division was moved into defensive positions behind the Finnish border after its panic on July 1. Now, while the 169th Infantry Division was assembling its forces for a crossing of the Kuola River and the assault on Salla, there was another panic in the SS Division. This particular incident, which happened in the morning of July 4, is described by Ziemke but not mentioned by Erfurth. The episode evidently started when General Demelhuber, believing that his division was under an armored attack and having no confidence in his troops, ordered a withdrawal that turned into the panic described by Ziemke:
Early on the morning of the 4th the XXXVI Corps headquarters staff witnessed an astonishing scene as the motorized SS-Division came streaming down the road toward Rovaniemi swearing Russian tanks were at its heels. For several hours the corps staff, including the chief of staff and Feige himself, was out on the road getting the SS-men headed back toward the front. Some of the vehicles were stopped and turned back at the Army of Norway advanced headquarters halfway down the road toward Kemiyärvi, and a few went the full 50 miles to Kemiyärvi where an SS-man urged the local commandant to blow the bridge across the Kemi River to hold up the Russian tanks which he claimed were in hot pursuit.6
Feige decided to remove the SS Division from the frontline on July 6. He had to abandon this plan when Hitler, very annoyed at the behavior of the SS troops, ordered the division to remain at the front. After the virtual disintegration of the SS Division, the XXXVI Corps decided that it no longer had the strength to complete the encirclement of Salla since it also had to hold the front west of Salla. The Army of Norway offered up its reserves—a Finnish battalion, a motorized machinegun battalion, and a battalion of the SS.
The 163rd German Infantry Division was on its way to Finland from Norway, by way of Sweden. It was planned to attach this division to Mannerheim’s army as his strategic reserve. General Feige, the XXXVI Corps commander, now asked Falkenhorst to request that a regiment from this division be attached to his corps. The last regiment of this division was still at Torino on the Swedish–Finnish border. Hitler approved Falkenhorst’s request on July 5.
General Erfurth is rather critical of Falkenhorst’s request and OKW’s acceptance of that request. He notes that the additional regiment was not required since Salla was captured on July 7, before the requested regiment was in place on the Salla front. He goes on to say that the 163rd Division was “torn into two parts” by the decision.7
The virtual disintegration of the SS Division caused plans to be changed that had far-reaching consequences for the Salla offensive. General Feige became concerned about the 6th Finnish Division attached to his corps. That division began its advance from a position about 70 kilometers south of Salla. General Feige’s concern was that the 6th Division, moving cross-country, would be exposed to Soviet attacks against its northern flank now that the German drive through Salla was stalled. Feige ordered the 6th Division to abandon its deep penetration to Alakurtti and turn its whole force north towards Kayrala.
The safety of the 6th Division was not Feige’s only concern. The 169th Infantry Division was worn down after having fought for Salla almost single-handedly after the collapse of the SS Division. It would need considerable help if it were to carry out the second envelopment.
The 169th Division was meantime ready to cross the Kuola River and assault Salla from the east. It hoped to trap the Soviet forces in Salla by crossing the terrain behind the town to the hills in the southeast. With dive-bomber and artillery support, the attack made progress against stubborn resistance and at noon the right-flank regiment was within a half-mile of Salla. The northern wing of the attack reached the fork in the road east of Salla where one road leads to Kayrala and the other to Korya.
The Soviets launched fierce counterattacks that were repelled. The Kuola River was crossed in the evening of July 6. The intensity of the fighting is attested to by the fact that 50 destroyed Soviet tanks littered the battlefield by the end of the day. The division’s right flank task force entered Salla in the evening but was thrown back in a strong counterattack. The withdrawal threatened to become another panic until the commanding general and two of his regimental commanders personally intervened.
Salla was captured in the evening of July 7. The bulk of the 122nd Rifle Division disengaged on the morning of July 8 and withdrew through the southern part of the planned encirclement. The area through which the Soviets withdrew was supposed to have been closed by the SS Division but it was still not closed.
The pursuit of the Soviets withdrawing from Salla was left to the SS Division, not a particularly good choice in view of its earlier performance. However, the Germans did not have much choice since they were afraid that the Soviets would make a stand in the narrows of the chain of lakes in the Kayrala area; they needed their best unit, the 169th Infantry Division, to try to prevent the Soviets from establishing themselves in these narrows.
The Finnish 6th Division had already reached Apa Lake and was pressing northward along its eastern shore. This division was lacking some of its punch as it had to leave all its artillery behind on its long diagonal trek across the wilderness from the border. The Finns encountered prepared Soviet positions south of Mikkola. General Dietl’s need for reinforcements in his attempt to penetrate the Litsa River line now took its toll on the XXXVI Corps as it was ordered to detach its motorized machinegun battalion and send it north to be attached to Mountain Corps Norway.
The line of advance of the XXXVI Corps was through the lake narrows west of Kayrala, an area that the Soviets had fortified as a fallback position since their takeover of the region in 1940. In the more northern part of this front—around the Maaseljaen Hills—defensive positions were blasted from the rocky hillsides.
The Germans soon learned that a frontal attack would not succeed. The Soviets had brought up a new division that held the Kayrala narrows—the 104th Rifle Division—while the 122nd Rifle Division had withdrawn behind the chain of lakes to regroup. The 1st Soviet Tank Division, which had forward elements in Salla, was in positions between Kayrala and Alakurtti. This division consisted of two tank regiments, a motorized infantry regiment, and artillery. The units holding the Kayrala positions and deployed between Kayrala and Alakurtti were grouped under the command of the XVII Soviet Corps. The drives of the Germans and Finns were stopped. The 6th Finnish Division managed to cut the road and railroad leading east from Kayrala on July 9, but vigorous Soviet counterattacks from the north and east drove it back.
Over the next five or six days the Soviets kept pouring in reinforcements via Kandalaksha that brought the 122nd Division back to full strength. These came primarily by sea from Archangel. The Luftwaffe failed to hinder the sea transport but carried out attacks as Soviet troops moved from Kandalaksha to the front.
After their initial repulses on July 9 and 10, the Germans concluded that they needed to resort to envelopments to have any chance of success. Since the XXXVI Corps had only two effective divisions (169th and 6th Finnish) the envelopment had to be limited in both size and scope. To avoid the risk of defeat in detail it was limited to trapping the Soviet forces holding the lake narrows.
The main effort was assigned to the 169th Division. The plan called for sending one regiment north along the Salla–Korya road and then for it to turn south and strike the Soviet right flank at a point about 13 kilometers north of Kuola Lake. This operation took some time since the regiment had to traverse the heavily wooded and hilly country between the Salla–Korya road and the Soviet positions east of the Kuola Lake. After having eliminated these positions, the regiment was to complete the northern prong of the encirclement. Two battalions from another regiment of the 169th Division were to work north along the western shore of Kuola Lake, around the northern tip of that lake, and strike the Soviet right flank. The Finnish 6th Division constituted the southern prong of the encirclement.