The handling of foreign affairs illustrates the uneven record of the Grant administration. The most important problem confronting the incoming president was the settlement of the Alabama Claims against Great Britain, a complex of grievances centering on the depredations committed against American shipping during the Civil War by the Alabama , a Confederate cruiser improperly purchased in England. During the war, Senator Charles Sumner, chairman of the Foreign Relations Committee, had grown so angry over the lack of true British neutrality that he now demanded immense reparations, perhaps to the extent of annexing Canada to settle the matter. Sumner had taken the lead in rejecting a settlement treaty negotiated by the Johnson administration and later provoked the government to increased militancy.
Fish recognized that American claims against Great Britain for granting belligerent status to Confederates were jeopardized by American pressure to grant the same rights to Cuban rebels, who had less claim under international law to such status but much American support for their revolt against Spain. Grant, inclined to sympathize with the Cubans, a course urged by Secretary of War Rawlins, prodded Fish to recognize Cuban belligerency. Concerned about the effect on negotiations with Great Britain, Fish delayed the process by continuing negotiations in Madrid for a peaceful settlement. Rawlins' death on 6 September 1869 removed the leader of the militants, and the failure of the Cuban insurgents to make solid gains lessened United States enthusiasm for active support. For a time, the divergence between Grant and Fish on Cuban policy threatened to throw the issue to Congress, where recognition of Cuban belligerency commanded strong support. Ultimately threatening to resign, Fish forced Grant to send a message to Congress that averted recognition.
Resolution of the Cuban issue permitted Fish to conclude negotiations with Great Britain. He arranged a meeting of commissioners that resulted in the Treaty of Washington, signed 8 May 1871, which acknowledged violations by Great Britain during the Civil War and provided for monetary settlement of American claims by an international commission in Geneva. Sumner argued that Great Britain had prolonged the war for two years at a cost of $2 billion but did not block Senate ratification. Although the commission eventually awarded the United States only $15.5 million, Americans had reason for pride in the settlement of the controversy in favor of the United States without belligerent actions and in the establishment of a precedent for settling international claims through arbitration.
Yet the diplomatic achievements of the Grant administration were shadowed by the Santo Domingo fiasco, the origins of which lay in United States interest in a Caribbean naval base to protect a future isthmian canal and in the inability of the Dominican government to manage its finances. American promoters working with President Bonaventura Báez approached Fish with an offer to sell the country to the United States. Suspicious of where the money would go and dubious about expansion, Fish tried to shelve the proposition, but Grant expressed interest in pursuing the matter. Grant sent his secretary, Orville E. Babcock, to Santo Domingo to investigate, though Fish ensured that he carried no diplomatic authority. Babcock, the Iago of the Grant administration, returned with a draft treaty of annexation.
The pluck and ambition of his bright young secretary captured Grant's admiration. Properly accredited for a second visit, Babcock returned with a treaty of annexation and, in case this was rejected, an agreement for the lease of Samaná Bay as a naval station. To further the treaty, Grant paid a surprise visit to Sumner's house, where he talked about the advantages of annexation and Sumner argued for a territorial appointment for an old antislavery ally. As Grant left, he understood Sumner to assure him of support; Sumner recalled that he had only promised to consider the matter carefully. In fact, Sumner was adamantly opposed to elimination of black self-government in Santo Domingo and led the Foreign Relations Committee to a 5–2 rejection of the treaty. Despite administration pressure, the full Senate rejected annexation by a 28–28 vote, with 19 Republicans joining the opposition.
Just as Grant had slogged south after Lee had stopped him at the battles of the Wilderness and Spotsylvania, his rebuff on the Santo Domingo issue made him even more determined on eventual victory. Heroism in war became pettiness in peace. He dismissed John Lothrop Motley, minister to Great Britain, an appointment made initially to please Sumner, and played a role in Sumner's deposition as chairman of the Foreign Relations Committee. Attorney General Hoar and Secretary of the Interior Cox, both lukewarm in supporting annexation, eventually left the cabinet, the latter replaced by Columbus Delano, who returned the Interior Department to spoilsmen. While Grant could do nothing to secure annexation, he refused to abandon the cause and even brought it up again in his last message to Congress.