@Von-Kuulness You are reading the rules correctly.
Your submarine would only have been able to retreat if it had established a valid alternative retreat route during combat movement (in case that had been possible, it depends on the map of course).
Retreat rule verification
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Scenario:
Attacked and conquered territory A.Attacked territory B from territory C, and for whatever reason decide to retreat, can I retreat into A if A touches B and C?. Or do I have to own it at the start of the turn?
Thanks.
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You can only retreat into territories that at least one attacking unit came from. So no, you cannot retreat into A.