In the first half of the 19th century, the US had been periodically at odds with Great Britain over their holdings and "interests" in Central America. These included
British Honduras (later called Belize), the Bay Islands off Honduras, and
Mosquitia. The latter included Greytown and what otherwise would have been the eastern halves of Honduras and Nicaragua. Ostensibly, the British set this up to protect the
Miskito, with whom they had been trading for 200 years. "The Mosquito question", noted one U.S. diplomat, "has been a subject for discussion & negotiation for nearly two centuries. It is now questionable, to whom this insalubrious sweep of Country on the Atlantic belongs; while in view of our policy in regard to Indian tribes [insisting no Western Hemisphere Indians had sovereign rights to the land they occupied] the Protectorate of Mosquitia must be taken, as a shift & subterfuge". The British claimed that since the Spanish had never conquered the Indians, their lands had not become part of Honduras and Nicaragua when those states freed themselves from Spanish rule. Later, in 1873, commenting bitterly on how this British claim became a de facto reality, then Secretary of State Hamilton Fish wrote that the 1860 Anglo-Nicaraguan
Treaty of Managua "confirmed the grants of land previously made in Mosquito territory. The similar stipulation on this subject in the [1856 Anglo-American] Dallas-Clarendon [
projet] Treaty was perhaps the most objectionable of any [in it], as it violated the cardinal rule of all European colonists in America, including Great Britain herself, that the aborigines had no title to the soil which they could confer upon individuals". This rule, Fish concluded, "has repeatedly been confirmed by judicial decisions, and especially by the Supreme Court of the United States". The U.S. had been comfortable dismissing the protectorate as a "subterfuge" until the British seized San Juan del Norte in 1848 and made it part of the protectorate, renaming it
Grey Town, after their then-governor of Jamaica, Charles Edward Grey. The British wanted the port as a bargaining chip to prevent the United States from seizing the entire isthmian watercourse. Greytown Harbor and its appurtenances, San Juan del Norte [now Greytown] and Punta Arenas (part of Greytown, a large spit of land across the harbor), were the only possible sites for any water route's Atlantic terminus. The recent American acquisitions of Texas and California made the British foreign secretary, Lord Palmerston, fear that the burgeoning young colossus would now turn south. According to American historian Mary Wilhelmine Williams, "The aggressive movement of the United States towards the southwest, accompanied by the talk of 'manifest destiny,' had given the British good reason to suspect the Americans of designs upon the territory of the isthmus, and to fear that they might attempt to monopolize the Nicaragua route". According to British historian Kenneth Bourne, "Neither side … aimed at exclusive control but each feared that this was, in fact, the other's real intention". Between 1849 and 1853, six events insulated Greytown from becoming any direct focus of antagonisms that lingered between the US and British governmnents. In 1849, the U.S. chargé d'affairs in Central America (posted to Nicaragua), E.G. Squier, negotiated a canal-building agreement between the
government of Nicaragua and Cornelius Vanderbilt, one of the richest men in America, and an owner of a huge fleet of steam vessels. (He was given 12 years to build a canal; in the interim he could run the previously mentioned steamboats across the isthmus.) In 1850, the Anglo-American Clayton-Bulwer Treaty had both sides agreeing not to "obtain or maintain" exclusive control of the canal, and it would be available on a neutral basis for all shipping. In 1851, Vanderbilt's inland steamboat company, the Accessory Transit Company (ATC), leased Punta Arenas for a nominal fee from the Mosquito Protectorate as the Atlantic terminus for their river steamboats. As noted previously, in 1852 Greytown became an autonomous city, and continued to lease Punta Arenas to the ATC for the same nominal fee. Also in 1852, and again in 1853, Anglo-American agreements recognized Greytown's new status (at least temporarily, until a new treaty with Nicaragua might settle the city's future permanently. This occurred with the Treaty of Managua in 1860 when Greytown became a part of Nicaragua.) But by 1853 there
was bad blood between Greytown and the ATC. The company refused to let its passengers visit Greytown, thus denying the town merchants their hoped-for customers and igniting what ''Harper's New Monthly Magazine'' called "a mortal feud" between town and company. Greytown canceled the ATC's lease to Punta Arenas and offered liberal terms for the company to move into Greytown proper, so the merchants would have access to the passengers as customers. The ATC refused to move and continued keeping passengers out of Greytown. When asked by Secretary of State William Marcy about Punta Arenas, the transit company's chief council, J. L. White, said they leased it not from Greytown but from Nicaragua. This was untrue, but Marcy believed White and sent Hollins and the
Cyane in March 1853 — about 16 months before the razing visit — to prevent Greytown from evicting the ATC from Punta Arenas. In July, after this intervention prevented the eviction, the British informed Marcy that, on June 11, 1851, the transit company had made a written request of Greytown — not Nicaragua — "to the effect that the Company desired the use of a portion of the land on the other side of the harbour" and that "the Government of Greytown had ceded that portion of land to the Company at a nominal rent, until the land in question might be required for the purposes of the Mosquito Government. This agreement", the British continued, "therefore clearly shows that the Accessory Transit Company considered the land in question as dependent on Greytown, and that they were bound to evacuate it whenever required by the Government of Greytown. They were so required in February last, and refused; and the United States' commander not only supported them in that refusal, but landed an armed force to protect them against the authorities of Greytown". About 10 months later, when he learned of the broken-bottle assault on Borland and of a recent, purported theft of food from the company by residents (compounding the earlier property damage), Marcy sent Hollins and the
Cyane back to Greytown, under Navy Secretary Dobbin's orders noted above. The total compensation of $24,000 (as noted above, about $840,000 in 2024 dollars) was demanded of the approximate 500 Greytown residents in only 24 hours. It was not forthcoming because the townsfolk did not have such money. Like the money, the apology to Borland was not forthcoming either; the entire city council had resigned over Borland's usurpation of the town's authority when he prevented the steamboat captain's arrest for murder. They also resigned to protest his hiring of 50 Americans to remain on Punta Arenas as an armed, ersatz constabulary to guard the transit company and its employees. Besides Secretary Dobbin's orders, Hollins and Fabens may have also been influenced by a letter to Fabens from the chief counsel of the Accessory Transit Company, J. L. White: {{Blockquote == Anglo-American war of words ==