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Alex Kimani

Alex Kimani

Writer, Divergente Research LLC

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Divergente Research LLC and Safehaven.com. 

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Gibraltar Flare-Up Could Further Complicate Brexit

Gibraltar

The UK’s journey to become the first nation ever to withdraw from the European Union appears fraught with more pitfalls than previously anticipated. On Wednesday, Prime Minister Theresa May scored what the British media has roundly termed a “pyrrhic victory” after defeating 117 rebellious Tory MPs advocating for a time limit to the controversial backstop arrangement to ensure that Brexit remains on track.

But it might still be premature for pro-backstop politicians to do a victory lap. There are still some major Brexit kinks that need ironing out before it becomes a reality, with the opposition this time likely to come from a neighboring nation jostling for ownership of a tiny peninsula.

Irish Border Backstop

The Irish border backstop agreement is a clause under Theresa May’s current Brexit plan. It provides that the UK will be forced to stay in a custom union with the EU at the end of the Brexit transition period for an indefinite period with no unilateral right to exit should it fail to strike a new trade deal or alternative arrangement before the end of the transition (slated for March 30, 2019).

Many Tory MPs and Brexiteers have been raising a furor over the Irish backstop because they see it as a blow for their dream of a “global Britain”, one that will allow the UK to strike trade deals around the world and set its own regulatory path unshackled by the EU. In fact, the Democratic Unionist party see backstop as being tantamount to breaking up the UK. Related: Corporate Bounty-Hunting Raked In $168M This Year

May’s win has saved her own skin for another 12 months at the very least, but she still faces an uphill battle trying to sell her Brexit deal to a recalcitrant parliament. If she somehow miraculously manages to squeak it through, she will still have an angry Madrid to contend with.

Between a Spanish Rock and a Hard Place

Since 2000, the Spanish government has advocated for joint sovereignty of Gibraltar, a tiny colonial exclave that Spain ceded to Britain more than three centuries ago. Britain has always rejected this proposal, and usually things have fizzled out amicably.

But now the matter now appears to have taken on new life, with Spain being particularly unhappy about the lack of clarity regarding bilateral relations between Gibraltar and the UK/Spain in the 585-page Withdrawal Agreement signed off by EU members on Sunday.

For years, Spain’s opposition Party Popular (PP) has been piling pressure on the government to press claims for suzerainty over Gibraltar as a matter of national pride. Never mind that Gibraltar, a 6.7-square kilometer rock promontory and home to 36,000 souls, has twice emphatically chosen to remain part of the UK and also voted in 2016 by a 96 percent majority to remain within the European Union, the largest Remain victory in 382 counting areas.

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Apart from feeling nostalgic about a tiny peninsula it controlled in the pre-Victorian era, Spain has a more genuine reason to want to stake claim to Gibraltar—an estimated 12,000 Spanish workforce crosses the border every day to work there, and Spain would naturally want to protect their interests.

The UK and Spain have already had parallel negotiations to talks in Brussels over Gibraltar, and things at first appeared to be going smoothly. No details have yet been divulged about the talks, though they are believed to have covered issues such as tobacco smuggling, environment, security cooperation, and citizen rights and taxes.

Gibraltar might be a small country but make no mistake about it— the future of Brexit talks might easily get disrupted over this seemingly small matter.

Indeed, the Gibraltar Agreement will be attached to the overarching Withdrawal Agreement between the UK and the EU—after it’s agreed upon. Spain cannot unilaterally block the UK’s departure from the EU since this requires a simple majority from the 27 EU member states. Any future vote with the UK as third country, however, will only pass via unanimous decision. A Spanish veto over the Gibraltar standoff could grind discussions to a halt pretty much like Canada’s 2016 CETA (Comprehensive Economic and Trade Agreement) deal.

By Alex Kimani for Safehaven.com

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