XYZ affair was a political affair in 1797 and 1798 involving United States and France.
It was a situation in which war could have been declared. It started with financial problems of the French government and their decision to seize American merchant ships. A diplomatic mission was working towards a de-escalation of the conflict, but the French side demanded bribes, which the US didn't want to grant.
The conflict finally was settled in a diplomatic way and a war was avoided.
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