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The XYZ Affair refers to a diplomatic incident between France and the United States in 1797-1798. Later it led to the undeclared war known as the Quasi-War between the U.S. and Republican France. Peace was restored with the Convention of 1800, also known as the Treaty of Mortefontaine.

Explanation:

The letters X, Y, and Z, stand as a substitution for the names of French diplomats involved in the incident: Jean Conrad Hottinguer (X), Pierre Bellamy (Y), and Lucien Hauteval (Z). Before the conflict, the United States concluded a Jay Treaty with Great Britain, with which many French leaders were angry. Later, they issued an order allowing the seizure of American merchant ships, and the situation escalated. During the presidency of John Adams, a diplomatic mission was sent to France as there was a threat of war. Before any formal negotiations even began, the American diplomats Charles Cotesworth Pinckney, John Marshall, and Elbridge Gerry, were shocked by French diplomats demanding a bribe. According to the Office of the Historian, French Foreign Minister, the Marquis de Talleyrand, refused to meet the American diplomatic mission formally. As a result, the American diplomats left the country without any negotiations.

President Adams started preparations for war but did not openly declare it. The Democratic-Republican party demanded that he publicly release the diplomatic correspondence about the negotiations in France. Adams obliged and released the correspondence, but replaced the names of the French diplomats with the letters X, Y, and Z. Eventually, the American Navy started fighting the French in the Caribbean. Later, peace negotiations proceeded, choosing to annul the 1778 Treaty of Alliance. A new agreement was made that eventually led to the Convention of 1800.