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Britain unofficially favored the South, because the cotton produced in the South was crucial to their mills. But the United Kingdom of Great Britain and Ireland was officially neutral in the American Civil War.

Entry into the war by Britain (or France) on behalf of the Confederacy would have greatly increased the South's chances of winning independence from the Union. The Union, under President Abraham Lincoln and Secretary of State William H. Seward worked to block this, and threatened war if any country officially recognized the existence of the Confederate States of America (none ever did). In 1861, Southerners voluntarily embargoed cotton shipments, hoping to start an economic depression in Europe that would force Britain to enter the war in order to get cotton, but did not succeed.

Lincoln's Emancipation Proclamation, by making ending slavery an objective of the war, had caused European intervention on the side of the South to be politically unappetizing. Pro-Southern leaders in Britain therefore spoke of mediation looking forward to peace, though they understood that meant the independence of the Confederacy and continuation of slavery.

See: http://en.wikipedia.org/wiki/Britain_in_the_American_Civil_War

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