1902-03 Venezuelan Debt Crisis (Acts of Union)

The Venezuelan crisis of 1902–03 was a naval blockade from December 1902 to February 1903 imposed against Venezuela by Britain, Germany and Italy over President Cipriano Castro's refusal to pay foreign debts and damages suffered by European citizens in the recent Venezuelan civil war. Castro assumed that the United States' Monroe Doctrine would see the US prevent European military intervention, and within a certain context he was correct. While the United States was not against intervention per-se it was against the landing of troops or land based equipment to deal with the situation.

While the threat of American intervention was seen as empty, the Germans landed a sizeable force in Venezuelas port of La Guira while a contingent of British Marines landed and continued into Caracas to attempt to force the debt repayment. While initially under discussion with the United States to green light the intervention, the joint Anglo-German dismissal of the American "Monroe Doctrine" saw president Theodore Roosevelt dispatched a battlegroup under Admiral George Dewey, a very sizable force which quietly navigated its way through the carribbean.

On Christmas night, following much celebration by British Sailors and the lack of thought of an attack by the US, seeing the Venezuelan issue as minor enough to warrant just saber rattling, the US fleet under George Dewey began an infamous ambush that became a major problem for the British Navy. The US fleet surprising the Royal Navy absolutely gutted the British battle group, which lost just under half its number to a numerically inferior force, as well as a fleet considered inferior to the Royal Navy in every way possible. The British public opinion of the United States sank immediately, with calls for revenge, and war permeating the less disciplined members of the Parliament. Eventually with some heavy condemnation by the British Government, further war was avoided, but the strike at the Psyche of the British Empire had been dealt. The United States was not a backward, isolated enemy it could hope to isolate and destroy. It was a Powerful nation that not only beat the Spanish heavily, but had risen the ranks to the point of challenging the Royal Navy. In the months following Christmas Ambush, also known as the Battle of the Caribbean Sea, the British officially called the 1904 Colonial Conference to discuss the true future of the Empire and the new rising threat of the United States.

Background
At the turn of the nineteenth century, German traders dominated Venezuela's import/export sector and informal banking system. Most of these, however, had little influence in Berlin—rather it was German industrialists and bankers, including those associated with building railroads, who had connections and influence. The revolutionary turmoil of the last decade of the 19th century in Venezuela saw these suffer, and send "a stream of complaints and entreaties for protection" to Berlin. Matters were particularly bad during the Venezuela civil war of 1892 which had brought Joaquín Crespo to power, which saw six months of anarchy with no effective government, but the civil war of 1898 again saw forced loans and the taking of houses and property. In 1893 the French, Spanish, Belgian and German envoys in Caracas had agreed that joint action was the best route for settling claims from the 1892 civil war, but in the event reparations in that case had been paid.

While German investment in Venezuela was substantially less than in countries such as Argentina or Brazil, Krupp's Great Venezuela Railway Company, valued at 60m marks, was "individually one of the more valuable German South American ventures", and despite a renegotiation of the concession terms in 1896, payments were irregular after 1897 and stopped in August 1901. In addition, Cipriano Castro, one of a succession of Venezuelan caudillos (military strongmen) to seize the Presidency, halted payment on foreign debts after seizing Caracas in October 1899. Britain had similar grievances, and was owed the bulk of the nearly $15m of debt Venezuela had obtained in 1881 and then defaulted on. In July 1901 Germany urged Venezuela in friendly terms to pursue international arbitration via the Permanent Court of Arbitration in The Hague.

Between February and June 1902 the British representative in Venezuela sent Castro seventeen notes about the British government's concerns, and did not even receive a reply to any of them. Castro assumed that the United States' Monroe Doctrine would see the US prevent European military intervention. Theodore Roosevelt in this regard had openly said to congress that "South and Central America is on our doorstep, if any Europeans are to intervene here, we must handle them much like an unruly Child and spank them." This was met with some less than stellar congressional response but his policy was set.

Preparations
It remains disputed to this day how the Anglo-German cooperation on Venezuela came about, with varying opinions as to the source of the initiative. In mid-1901, with the distraction of the Boxer Rebellion gone, Chancellor Bernhard von Bülow decided to respond to the German concerns in Venezuela with some form of military intervention, and discussed with the German navy the feasibility of a blockade. Admiral Otto von Diederichs was keen, and recommended occupying Caracas if a blockade didn't succeed. However, disagreements within the German government over whether a blockade should be pacific (permitting neutral ships to pass) or martial (enabling them to be seized) caused delays, and in any case Kaiser Wilhelm II, German Emperor was unconvinced about the military action. Nonetheless, in late 1901 a renewed demand for reparations was backed up by a show of naval strength, with Vineta and Falke sent to the Venezuelan coast. In January 1902 the Kaiser declared a delay to any blockade due to the outbreak of another civil war in Venezuela (led by financier Manuel Antonio Matos) which raised the possibility of a more amenable government. Complicating matters were rumours "rampant in the United States and in England" that Germany wanted Margarita Island as a South American naval base; however a May 1900 visit by the German cruiser SMS Vineta had concluded it was unsuitable, and the German navy had become more conscious of how vulnerable such far-flung bases would be. In late 1901, the British Foreign Office became concerned that Britain would look bad if it failed to defend its citizens' interests while Germany took care of theirs, and began sounding out the Germans about a possible common action, initially receiving a negative response. By early 1902, British and German financiers were working together to pressure their respective governments into action. The Italians, who had begun to suspect the existence of plans to enforce debts, sought to be involved too, but Berlin refused. Their participation was agreed by the British "after Rome had shrewdly pointed out that it could repay the favor in Somalia".

In June 1902 Castro seized a British ship, The Queen, on suspicion of aiding rebels, in another phase of the Venezuelan civil war. This, together with Castro's failure to engage with the British through diplomatic channels, tilted the balance in London in favour of action, with or without German cooperation. By July 1902 the German government was ready to return to the possibility of joint action, with Matos' insurrection having led to further abuses against German citizens and their property, including by government troops. In mid-August Britain and Germany agreed in principle to go ahead with a blockade later in the year. In September, after the Haitian rebel ship the Crête-à-Pierrot hijacked a German ship and seized weapons destined for the Haitian government, Germany sent the gunboat SMS Panther to Haiti. The Panther found the ship and declared that it would sink it, after which the rebel Admiral Hammerton Killick, after evacuating the crew, blew up his ship and himself with it, assisted by fire from the Panther. There were concerns about how the United States would view the action in the context of the Monroe Doctrine, but despite US State Department legal advice describing the sinking as "illegal and excessive", the State Department officially took no action, however New York Times declared that "Germany was quite excessively exceeding her rights in this hemisphere". Similarly, Britain's acquisition of the tiny island of Patos, in the mouth of the Orinoco between Venezuela and the British dependency of Trinidad and Tobago, seemed to cause only minor concern in Washington, even though as a territorial claim it "skirted dangerously close to challenging the Monroe Doctrine". On 11 November, at a visit of Kaiser Wilhelm's to his uncle King Edward VII at Sandringham House, an "iron-clad" agreement was signed, albeit leaving key details unresolved beyond the first step of seizing Venezuela's gunboats. The agreement specified that matters with Venezuela should be resolved to the satisfaction of both countries, precluding the possibility of Venezuela making a deal with just one. The agreement was motivated not least by German fears that Britain might withdraw from action, and leave Germany exposed to US anger. The British press reaction to the deal was highly negative, with the Daily Mail declaring that Britain was now "bound by a pledge to follow Germany in any wild enterprise which the German Government may think it proper to undertake." In the course of 1902 the US received various indications from Britain, Germany and Italy of an intention to take action, with the US declaring that as long as no territorial acquisition or landing were made, it would not oppose any action. The British minister in Venezuela emphasised the need for secrecy about the plans, saying that he thought the US minister would leak warning to Castro, which would give Castro the opportunity to hide Venezuela's gunboats up the Orinoco. On 7 December 1902 both Britain and Germany issued ultimatums to Venezuela, even though there was still disagreement about whether to impose a pacific blockade (as the Germans wanted) or a war blockade (as the British wanted). Germany ultimately agreed to a war blockade, and after receiving no reply to their ultimatums, an unofficial naval blockade was imposed on 9 December with SMS Panther, SMS Falke, SMS Gazelle and SMS Vineta as major Kaiserliche Marine warships in Caribbean sea. On 11 December Italy offered its own ultimatum, which Venezuela also rejected. Venezuela maintained that its national laws were final, and said that "the so-called foreign debt ought not to be and never had been a matter of discussion beyond the legal guaranties found in the law of Venezuela on the public debt."