Venezuela Crisis of 1902 – 03 The Venezuela Crisis of 1902 – 1903 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 , but at the time the US saw the Doctrine as concerning European seizure of territory , rather than intervention per se . With prior promises that no such seizure would occur , the US allowed the action to go ahead without objection . The blockade saw Venezuela ' s small navy quickly disabled , but Castro refused to give in , and instead agreed in principle to submit some of the claims to international arbitration , which he had previously rejected . Germany initially objected to this , particularly as it felt some claims should be accepted by Venezuela without arbitration . U . S . President Theodore Roosevelt forced the Germans to back down by sending his own larger fleet under Admiral George Dewey and threatening war if the Germans landed . With Castro failing to back down , US pressure and increasingly negative British and American press reaction to the affair , the blockading nations agreed to a compromise , but maintained the blockade during negotiations over the details . This led to the signing of an agreement on 13 February 1903 which saw the blockade lifted , and Venezuela commit 30 % of its customs duties to settling claims . When the Permanent Court of Arbitration in The Hague subsequently awarded preferential treatment to the blockading powers against the claims of other nations , the US feared this would encourage future European intervention . The episode contributed to the development of the Roosevelt Corollary to the United States ' Monroe Doctrine , asserting a right of the United States to intervene to " stabilize " the economic affairs of small states in the Caribbean and Central America if they were unable to pay their international debts , in order to preclude European intervention to do so . 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 " caudillo " s ( 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 ( US President September 1901 – March 1909 ) , however saw the Doctrine as concerning European seizure of territory , rather than intervention per se . As Vice - President , in July 1901 , Roosevelt said that " if any South American country misbehaves toward any European country , let the European country spank it , " and reiterated that view to Congress on 3 December 1901 . 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 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 " La 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 endorsed the action , and the " New York Times " declared that " Germany was quite within her rights in doing a little housecleaning on her own account " . 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 no 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 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 . " Blockade . The German naval contingent ( numbering four to Britain ' s eight ) followed the British lead in operational terms . The British ships of the " Particular Service Squadron " under Commodore R . A . J . Montgomerie included the sloop HMS " Alert " and the protected cruiser HMS " Charybdis " . An Italian naval contingent arrived in support of the blockade on 16 December . The blockaders captured four Venezuelan warships , with the Venezuelan navy providing little challenge , and virtually all its ships captured within two days . The Germans , lacking the capacity to tow them to Curaçao , simply sank two Venezuelan ships that proved unseaworthy . On land , Castro was more powerful , and arrested over 200 English and German residents of Caracas , prompting the allies to land troops to evacuate their citizens . On 13 December , after a British merchant vessel had been boarded and its crew briefly arrested , the British demanded an apology , and failing to receive it , launched a bombardment of Venezuelan forts at Puerto Cabello , assisted by the German SMS " Vineta " . The same day , London and Berlin received from Washington a request forwarded from Castro to submit the dispute to arbitration , which neither Power relished , because of concerns over enforceability of any settlement . In addition , Castro ' s offer initially covered only claims arising from the 1898 civil war , and made no mention of other claims . Germany believed that these claims should not be subject to arbitration , but London was more willing to agree , accepting arbitration in principle , and suggested a compromise . The threat of arbitration made London move to the next stage in order to negotiate from a position of strength , and 20 December was set for the begin of the official blockade . As a result of a combination of communications issues and practical delays , the British notice of an official blockade was published on 20 December , but the German blockade of Puerto Cabello was only effected on 22 December , and on Maracaibo on 24 December . In the mean time , whilst Britain and Germany considered Castro ' s offer , US public opinion increasingly turned against the action , and there were references to the nearby presence of Admiral George Dewey ' s US fleet , which was conducting long - planned exercises at Puerto Rico , although neither the British government nor the British press considered US intervention a serious possibility . The US did , after the December ultimatums to Venezuela , send an envoy to survey Venezuela ' s defensive capabilities , and thereby confirmed its confidence that the US Navy could repel a German invasion . The publication of a British government White Paper , revealing the nature of the " iron - clad " agreement , infuriated the British press , not least because the yoking of British and German interests was considered dangerous , and unnecessary for the mere collection of some foreign debts . This was exemplified by Rudyard Kipling ' s polemic poem " The Rowers " , published in " The Times " on 22 December as a response to the crisis ; it included the words " a secret vow ye have made with an open foe . . . a breed that have wronged us most . . . to help them press for a debt ! " Britain unofficially told the United States on 17 December that it would accept arbitration in principle , and that Germany would soon agree too , and it did on 19 December . Castro ' s failure to back down left limited options in the face of the Monroe Doctrine , which would make any seizure of Venezuelan territory , even temporarily , problematic . In addition , the negative reaction in the British and American press had raised the costs of the intervention particularly for Germany , whose relations with the US were more fragile than Britain ' s and who placed great value on the attitude of the British press . Germany had followed Britain ' s lead throughout the planning and execution of the operation , and as the British Ambassador in Berlin observed , " The idea of arbitration did not smile on them , but they accepted it at once because we had proposed it " . Fourteen years later ( during a presidential campaign against the backdrop of World War I ) , then US President Theodore Roosevelt claimed that Germany ' s acquiescence to arbitration came from his threat to attack the German ships in Venezuelan waters using Dewey ' s fleet . No documentary evidence has been found to confirm the claim . However , following the 18 December announcement that the US Navy fleet would be dispersed to West Indian ports for Christmas , which would take some of it to Trinidad , near the Venezuelan coast , the German embassy in Washington sought clarification from the US government . The Secretary of State ' s remarks " were as close to a direct threat as it was possible to come in diplomatic parlance . " Roosevelt also claimed that Germany had intended to seize a Venezuelan harbour and establish a permanent German military base ; and certainly the German representative in Venezuela is known to have had such ambitions . However , historical records suggest the German Kaiser had no interest in such a venture , and that motivations for the intervention lay with the insult to German prestige from Castro ' s actions , and only gave the go ahead after being sure that Britain would play the lead role . In January 1903 , as the blockade continued during the negotiations , the German SMS " Panther " attempted to enter the lagoon of Maracaibo , a centre of German commercial activity . On 17 January it exchanged fire with the settlement of Fort San Carlos , but withdrew after half an hour , as shallow waters prevented it getting close enough to the fort to be effective . The Venezuelans claimed this as a victory , and in response the German commander sent the " Vineta " , with heavier weapons , to set an example . On 21 January the " Vineta " bombarded the fort , setting fire to it and destroying it , with the death of 25 civilians in the nearby town . The action had not been approved by the British commander , who had been told by London after the incident of 13 December not to engage in such action without consulting London ; the message was not passed to the German commander , who had been told previously to follow the English commander ' s lead . The incident caused " considerable negative reaction in the United States against Germany " ; the Germans said that the Venezuelans fired first , which the British concurred with but declared the bombardment " unfortunate and inopportune " nonetheless . The German Foreign Office said that the " Panther ' s " attempted incursion into the lagoon of Maracaibo had been motivated by a desire to ensure the effective blockade of Maracaibo , by preventing Maracaibo from being supplied across the adjacent Colombian border . Subsequently Roosevelt informed the German Ambassador that Admiral Dewey had orders to be ready to sail to Venezuela from Puerto Rico at an hour ' s notice . Outcome . After agreeing to arbitration in Washington , Britain , Germany and Italy reached a settlement with Venezuela on 13 February , resulting in the Washington Protocols . Venezuela ' s debts had been very large relative to its income , with the government owing Bs 120m in principal and Bs46m in interest ( and another Bs186m claimed in war - related damages ) , and having an annual income of Bs30m . The agreement reduced the outstanding claims by Bs150m , and created a payment plan taking into account the country ' s income . Venezuela agreed in principle to pledge 30 % of its customs income at its two major ports ( La Guaira and Puerto Cabello ) to the creditor nations . Each power initially received $ 27 , 500 , with Germany promised another $ 340 , 000 within three months . The blockade was finally lifted on 19 February 1903 . The Washington agreements foresaw a series of mixed commissions to adjudicate claims against Venezuela ( of respectively one Venezuelan representative , one representative from the claimant nation , and an umpire ) , and these " worked , with a few exceptions , satisfactorily ; their awards were accepted ; and the dispute was widely regarded as settled . " However , the blockading nations argued for preferential treatment for their claims , which Venezuela rejected , and on 7 May 1903 a total of ten Powers with grievances against Venezuela , including the United States , signed protocols referring the issue to the Permanent Court of Arbitration in The Hague . The Court held on 22 February 1904 that the blockading powers were entitled to preferential treatment in the payment of their claims . The US disagreed with the decision in principle , and feared it would encourage future European intervention to gain such advantage . As a result , the crisis produced the Roosevelt Corollary to the Monroe Doctrine , described in Theodore Roosevelt ' s 1904 message to Congress . The Corollary asserted a right of the United States to intervene to " stabilize " the economic affairs of small states in the Caribbean and Central America if they were unable to pay their international debts , in order to preclude European intervention to do so . The Venezuela crisis , and in particular the arbitral award , were key in the development of the Corollary .