At the beginning of the American Civil War, the United Kingdom issued a proclamation of neutrality on May 13, 1861. Nevertheless, the Confederate States of America assumed that the British would prove sympathetic, despite their negative view on slavery. Although the Confederacy attempted to provoke British intervention through cotton diplomacy, leading to failed threats of a trade embargo on "King Cotton," it was the Trent Affair in 1861, when the USS San Jacinto stopped the British civilian vessel RMS Trent and took off two Confederate diplomats named James Murray Mason and John Slidell, that almost provoked a third war between the United Kingdom and the United States. While diplomatic measures between London and Washington were ongoing, the British under Lord Palmerston began mobilizing a small militia in British North America who were unprepared in the event of a full-scale invasion of up to an estimated 200,000 soldiers in the Union Army.
The United Kingdom knew that any recognition of a sovereign and independent nation called the Confederate States would be an act of war against the United States. In addition, the United Kingdom had to take into consideration that the British economy was heavily reliant on growing trade with the United States, most notably cheap grain imports high in demand which in the event of war, would be cut off by the Americans. Third, the British knew that the United States had an indispensable European ally, the Russian Empire to help fight in a possible war against the United Kingdom. And lastly, British forces in British North America were vastly outnumbered by the Union Army which if British war tactics proved to be unsuccessful, the risk of annexation of British North America by the United States might be inevitable.
The British were content with a formal apology on behalf of the United States so that war could be averted over lingering issues revolving around the Trent Affair. Thus, Abraham Lincoln eventually relented as he did not want to fight a war on two fronts, having United States Secretary of State William H. Seward smooth matters over.
Despite outrage and intense American protests, the United Kingdom allowed the British-built CSS Alabama to leave port as a commerce raider under the naval flag of the Confederacy. After the American Civil War ended in 1865, the United Kingdom abided by the terms of the Treaty of Washington outlined by an arbitration of an international tribunal in 1871, thus paying $15.5 million in gold to the United States for the destruction caused by the CSS Alabama, while admitting no guilt.[20]