Yup, SH3 AI near land and harbors is terrible. I seldom do it anymore but I used to raid into harbors, shoot all my torpedoes, then maneuver into a slip and surface while protected from fire by the sea walls and buildings and pull in my external torpedoes, then dive and pull out of the slip and sink some more ships.
Air raid sirens would go off and all hell would break lose as they tried shooting at me but they could not hit me. Sometimes they would shell other ships that happened to be in the way. Quite entertaining.
Steve
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