You’re right that this rule is ambigious in this rule book. But to me the intention of the game makers is very clear. That shows not from this rule book, but from all rule books after this version. For example in the rule book from 1943 2nd, They state specifically that all strategic bombing raids take place first. This resolves any argument about who pays the IPC’s to the bank, the attacker or the defender! Since they solved this in the next rule book, i think it is quite obvious what they intended and tried to correct.
Rockets…
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Ok, let’s say UK has the Rockets upgrade, and they want to fire them at Southern Europe, and they roll a 5. That means Germany loses 5 (IPC) bucks, but does that also mean that Southern Europe can only produce 1 unit on Germany’s next turn?
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Production levels are not affected by rockets or strategic bombing runs. So no, Germany may still produce 6 units in S. Europe the round England hits them with a rocket, regardless the level of damage inflicted by the rocket.