Financial Coercion in an Interdependent World: The United States’ Exploitation of the British Empire’s Financial System and Britain’s Subsequent Withdrawal from the Suez Crisis in 1956

Abstract

This thesis undertakes an analysis of Britain’s economic, financial, and military relationships with Iran, the United States, and the sterling area from 1901 to 1956, asking how American financial coercion led to the erosion of British power, beginning with Britain’s withdrawal from the Suez Canal during the Suez Crisis in 1956.

The research presented in this thesis focuses on three key documents, analysing them chronologically: The 1933 Anglo-Iranian Oil Company Concession, the 1945 Anglo-American Loan Agreement, and Britain’s Exchange Controls Act 1947 to map Britain’s relationships leading up to the Suez Crisis, and then the diplomacy during the Suez Crisis is also analysed. The relationships are analysed using the theory of interdependence and through concepts of dependence, independence, interdependence, hard power, soft power, and coercion. Previous scholars have not looked at Britain’s web of international relationships in terms of how they contributed to Britain’s withdrawal from the Suez Crisis, instead focussing on Britain’s dollar deficit, the run on its gold reserves, and consequent financial crisis.

This thesis finds that Britain’s hard power depended on access to oil, its soft and coercive power depended on the sterling area, and Britain and the United States both augmented each other’s hard power, creating an interdependence. Britain was using the sterling area to counterbalance its economic dependence on the United States and maintain its political independence. The sterling had a crucial, central role in all of the relationships: if the value of the sterling fell, Britain’s hard power, soft power, and coercive power would fall with it. The United States’ financial coercion during the Suez Crisis was effective because it threatened the value of the sterling, which threatened to destroy Britain’s relationships of dependence, which would destroy the foundation of Britain’s power.