From the German perspective, plans were in flux. They had backed off from any attempt to invade Great Britain from the continent in late 1940. They also decided to forego an attack to take Gibraltar and seal the Mediterranean from the west. The biggest decision made in December 1940 was the decision to prepare to invade Russia. At the same time, Hitler decided to occupy Greece and Yugoslavia. Germany was limited to opportunistic changes to plans based on the current situation. One fateful decision was to send a German force to North Africa to retrieve the situation in the Western Desert where the Italians had been pushed back by a successful British offensive. They only hoped to hold Tripolitania and possibly to advance to Benghazi.
Fortunate for the Germans and Italians, Churchill had decided to send forces to Greece, which would have the affect of jeopardizing the recent gains in Cyrenaica in Libya. Before that happened, the forces available included the 7th Armoured Division and the 6th Australian Division in the Western Desert. Of the rest, the largest group was in Egypt, in the process of formation: the 2nd Armoured DIvision, the 6th British Division, the New Zealand Division, and the Polish brigade. Also in Palestine were the 7th Australian Division and the 9th Australian Division. They were still incomplete with more troops still in transit. The rest were in East Africa. Two Indian divisions were in Eritrea, the 4th and 5th. The 1st South African Division and two African divisions were in Italian east Africa.
The armoured divisions were both weakened. The 7th Armoured Division had been expended in the attack on Libya. They were not capable of operations without being refreshed. The 2nd Armoured Division was weak and still being formed. The British had tank problems in late 1940 and early 1941. The tanks that they had tended to be in poor mechanical condition. The commander of the 2nd Armoured Division had complained to General Wavell on his arrival of the poor mechanical condition of his cruiser tanks. This is baaed on the account in Vol.III of the Australian Official History.