Although Egypt's influence on European history dates back more than 5000 years, at the beginning of the 19th century, it was still a mysterious and relatively unknown place to Europeans. One reason was that Egypt was Muslim and Europe was Christian, and the bitterness engendered by the Crusades and subsequent wars did not facilitate open communication. Another reason was that most knowledge of ancient Egyptian society had been lost some time before the Greeks occupied the coast, so even though many people had seen the pyramids, temples and hieroglyphics, no one knew their origin or purpose.

All of that began to change during the Napoleonic Wars when a French army led by General Napoleon landed near the western mouth of the Nile River in 1798. His goal was to disrupt Britain's trade with India, and although he was not successful--the French defeated Egypt's Ottoman defenders but then had its fleet sunk by the British--Napoleon's invasion kindled European interest in ancient Egypt and its history. The new science of "Egyptology" received a boost when a small group of French soldiers uncovered a stone table near Rosetta that contained inscriptions that enabled scholars to decipher hieroglyphics.

Britain's main interest was in stabilizing the region, so the government tended to support the Ottoman Empire (theoretically sovereign over Egypt) against all challengers, while British merchants tried to find business opportunities in the Nile Valley and Suez. An "overland route" opened between the port of Alexandria and the Gulf of Suez in the 1840s and Robert Stephenson's railroad, completed in the 1856, improved the route. Although it could not handle bulk cargoes, which traveled by ship around Africa, the railroad and telegraph line sped up communications between Britain and India, and was put to especially good use in organizing military forces to put down the 1857 Indian Mutiny.

The opening of the Suez Canal in 1869 complicated the British position in Egypt. The government had opposed the construction of the Suez Canal from the beginning, but all that had accomplished was to force Egypt into a partnership with the French to build the canal. British canal opponents feared that British shipping would gravitate towards the canal and become dependent on it, then suffer interruptions during war time because the canal was too vulnerable.

The opponents were partially correct--the canal was enormously successful and British merchants flocked towards it. In its first thirteen years of operation, the freight that travelled through the canal each year increased from just under a half million to more than five million tons, and British ships carried more than eighty percent of it by 1882.

At first, the British government tolerated that arrangement, since British ships paid only nominal fees to pass through a canal owned by European (mostly French) investors (55%) and the Egyptian government (45%). According to the British Foreign Secretary Lord Palmerston, Britain had no interest in possessing Egypt as long as Egypt was "well-run and hospitable"; i.e. British merchants could operate freely there. But the process of modernization, with its dependence on French military advisors, British capital and other foreign influences, stimulated the Egyptian nationalist movement, and ultimately, that provided a pretext for the British government to get directly involved in the canal.

Under Ismail (1863-1879), the Egyptian government debt rose from £3 million to nearly £100 million, largely due to Ismail's efforts to modernize Egypt. In addition to completing the Suez Canal, he hired veterans of the civil war in the United States to train his army, built more than a thousand miles of railroads, developed a deepwater port at Alexandria, financed land reclamation and irrigation projects to create more farm land and paid Ottoman authorities in Constantinople to allow his son Tewfik to succeed him.

Ismail also spent money to expand the Egyptian cotton industry. During the shortages caused by the US Civil War, this effort was successful, but once the war ended Egypt was left with an enormous debt and declining export revenues. Efforts to refinance the debt only made things worse because service fees on foreign loans absorbed a large part of their value. In one instance, Egypt received only £35 million from five loans worth £55 million, and because Egypt paid interest on the full value of the loans, the contractual interest rate of seven percent turned into an effective rate that went as high as twenty percent.

By 1875, even though Egypt had repaid £29 million on its loans, it still owed £46 million and the country was near bankruptcy. British prime minister Benjamin Disraeli learned from private sources that the Egyptian shares in the Suez Canal were for sale. Acting without parliamentary authorization, he bought them for the British government and thereby greatly increased the British stake in Egyptian stability.

Although they made some progress in reducing the Egyptian debt, the presence of foreigners in the Egyptian government aggravated the nationalists. Their cause was further aided by abnormally low flooding of the Nile in 1876 and 1877 which caused food shortages and starvation in Upper Egypt. As the government went further into debt, it fell behind on payments of wages to the army, risking their loyalty. The first army mutiny came in February 1879 and Ismail was overthrown by a second revolt in June 1879.

Ismail's son Tewfik took over. Europeans welcomed the change because they believed Tewfik, a weak ruler, could be influenced more easily. Tewfik proved too weak to control the Egyptian nationalists, however, and his reign turned out to be a disaster for all parties.

Egyptian military officers rose up against Tewfik's government in February 1881 and again in September, both times under the leadership of Colonel Ahmed Arabi Pasha. Tewfik responded by dismissing the pro-European Prime Minister Cherif Pasha and replacing him with Mahmoud Pasha Sami, a nationalist leader. Sami then picked Arabi Pasha to take charge of one of the government ministries.