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By September 1862, the American Civil War had been raging for over a year. Union victories in the west had been overshadowed by Confederate General Robert E. Lee's string of victories throughout that summer, as well as the need to decisively defeat the Union Army to bring in Britain and France, led Lee to launch an invasion of Maryland.
Hoping a victory on Northern soil would break Union morale and allow the south to end the war, the Army of Northern Virginia was near Sharpsburg when it learned the Union Army of the Potomac, was near. Lee's plan, which involved splitting his army, as well as the movement of every brigade, division and corps, had been discovered by union troops. However, Confederate cavalry had discovered the Union was maneuvering to counter.
Deciding to surprise attack with an encirclement and flanking maneuver, Lee had his troops charge the Union left flank, breaking through fairly quickly, and succeeding in cutting the Union off from Sharpsburg. The attack then pushed in, squeezing the Union lines to the point that the army was split.
Pressing the advantage, Lee committed all his men on the enemy flank cutting union troops to pieces. The Confederates broke through and the flank collapsed. With one of their flanks destroyed, and with the other under intense attack, McClellan lost his nerve and retreated.
Upon learning McClellan had been defeated at Sharpsburg, Lincoln told the officer to counterattack, to keep Lee busy until reinforcements arrived. McClellan, cautious, and believing that he was outnumbered two to one, refused. Lee, upon realizing McClellan wouldn't attack, Lee had his army march towards Washington.
Lee's attack suffered casualties. However, the ANV secured Washington in the end. Lee handed Lincoln a note that demanded a surrender, or Lee would occupy Maryland. Lincoln had no choice. Not only did Lee win decisively, Britain and France had recognized the CSA, and were mobilizing their armies.
The Union accepted defeat, and allowed the Confederates to keep their territory. The Union was forced to accept the loss of half of the New Mexico and Arizona Territories. The Indian territory between Texas and Arkansas (Oklahoma in our timeline), was also ceded.
Missouri and Kentucky stayed in the Union, as did Maryland and Delaware. The Union tried to gain Eastern Tennessee, which wanted to stay with the Union.
Nevertheless, the final territorial situation didn't change much. Both sides kept important territories. However, resentment and anger was prevalent on both sides of the border. With the District of Columbia faced with the guns of Virginia, the state capital was moved to Philadelphia.
The war's end had brought significant changes to the North American continent: The US had been split in two, and tension was still high. At the same time, the British support for the south had largely waned afterwards. The relations between the two states was still friendly, though neither was really capable of supporting the other in a conflict.
French relations with the Confederacy was strong. The Confederates helped keep the Mexican Emperor Maximilian on the throne, and the Confederates formed a defensive military alliance with France. However, the British relationship with the South was enough to continue to fuel anti-British sentiment.
The US largely viewed expansion as unnecessary, as the territory they had needed to be defended from the Confederate threat.
Tensions between the US and the Confederacy when war in Europe began in 1870. The Prussian-led German states go to war with France, and the Confederacy considers entering the war on the side of France. This leads to the US threatening war. Knowing that after just eight years of peace, the people will not want war. Southern president Robert E. Lee agrees to not intervene.
France is defeated after just nine months, and the US is the first nation to recognize the German Empire. This leads to an alliance out of mistrust for both France and the Confederacy. The US strengthens its navy and signs a naval agreement where it will defend German merchant shipping and its coast.
This alliance leads to near war with France in 1889, though peace does stay. However, the tensions continue to mount.
As the 19th century ends, the US decides that it needs to be able to match Britain in naval might. It orders a new fleet of ten new battleships and ten armored cruisers. These lead to an arms race that causes both sides to spend huge amounts of money on naval production.
Germany joins in and by the early 20th century assembles a fleet that rivals the US in strength and approaches Britain. Now threatened on two fronts, the British launch HMS Dreadnought with the mission of ending the arms race. Germany and the US respond with their own Dreadnoughts.
The Confederates build their own dreadnought, and begin naval expansion. The Confederates and French go to war with Spain over treatment of Cuba, defeating it within six weeks. The Confederates annex Cuba while the French annex the Philippines and their African territories.
By 1914, tensions run high, and the possibility for war is high.