Gamal Abdel Nasser
Nationalization of the Suez Canal Company

After the three-year transition period ended with Nasser's official assumption of power, his domestic and independent foreign policies increasingly collided with the regional interests of the UK and France. The latter condemned his strong support for Algerian independence, and the UK's Eden government was agitated by Nasser's campaign against the Baghdad Pact. In addition, Nasser's adherence to neutralism regarding the Cold War, recognition of communist China, and arms deal with the Eastern bloc alienated the United States. On 19 July 1956, the US and UK abruptly withdrew their offer to finance construction of the Aswan Dam, citing concerns that Egypt's economy would be overwhelmed by the project.

Nasser was informed of the British–American withdrawal in a news statement while aboard a plane returning to Cairo from Belgrade, and took great offense. Although ideas for nationalizing the Suez Canal Company were in the offing after the UK agreed to withdraw its military from Egypt in 1954 (the last British troops left on 13 June 1956), journalist Mohamed Hassanein Heikal asserts that Nasser made the final decision to nationalize the company that operated the waterway between 19 and 20 July. Nasser himself would later state that he decided on 23 July, after studying the issue and deliberating with some of his advisers from the dissolved RCC, namely Boghdadi and technical specialist Mahmoud Younis, beginning on 21 July. The rest of the RCC's former members were informed of the decision on 24 July, while the bulk of the cabinet was unaware of the nationalization scheme until hours before Nasser publicly announced it. According to Ramadan, Nasser's decision to nationalize the canal was a solitary decision, taken without consultation.

On 26 July 1956, Nasser gave a speech in Alexandria announcing the nationalization of the Suez Canal Company as a means to fund the Aswan Dam project in light of the British–American withdrawal. In the speech, he denounced British imperialism in Egypt and British control over the canal company's profits, and upheld that the Egyptian people had a right to sovereignty over the waterway, especially since "120,000 Egyptians had died building it". The motion was technically in breach of the international agreement he had signed with the UK on 19 October 1954, although he ensured that all existing stockholders would be paid off.

The nationalization announcement was greeted very emotionally by the audience and, throughout the Arab world, thousands entered the streets shouting slogans of support. US ambassador Henry A. Byroade stated, "I cannot overemphasize popularity of the Canal Company nationalization within Egypt, even among Nasser's enemies." Egyptian political scientist Mahmoud Hamad wrote that, prior to 1956, Nasser had consolidated control over Egypt's military and civilian bureaucracies, but it was only after the canal's nationalization that he gained near-total popular legitimacy and firmly established himself as the "charismatic leader" and "spokesman for the masses not only in Egypt, but all over the Third World". According to Aburish, this was Nasser's largest pan-Arab triumph at the time and "soon his pictures were to be found in the tents of Yemen, the souks of Marrakesh, and the posh villas of Syria". The official reason given for the nationalization was that funds from the canal would be used for the construction of the dam in Aswan. That same day, Egypt closed the canal to Israeli shipping.
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