The battle for Gibraltar

Is this all about fishing quotas?

It has virtually nothing to do with quotas. The proximate trigger for the flare-up was Gibraltar's decision to build a concrete reef off the Rock. Gibraltar's government says it is to protect fish stocks, but it has the not-so-coincidental side effect of stopping local Spanish fisherman from trawling in disputed waters (Madrid insists the Treaty of Utrecht see below gives no territorial waters to Gibraltar, except for the port harbour). But the number of Spanish fishermen affected is tiny fewer than ten, say some reports.

Similarly, the Spanish line that more intensive border checks are needed to combat cigarette smuggling look specious: Spain is likely to lose far more from disruption to the local economy than it saves on tobacco duties. No, the dispute is as it always has been about national pride. As one Popular Party MP, Jos Ignacio Landaluce, puts it: "It may be small, but it is ours."

Is it Spain's?

It was Castile's, then Spain's from the expulsion of the Moors in 1462, until it was taken by Anglo-Dutch forces in 1704. So to Spaniards, it's a part of Spain, seized during a Spanish dynastic dispute that sucked in foreign powers. But the 30,000 or so Gibraltarians, whose political status is that of a self-governing British Overseas Territory, are happy with the status quo.

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Why is Britain so keen to retain sovereignty?

Perhaps it isn't. For some in the UK government, the Rock is a hangover of empire that we could nicely be rid of. "The big worry... is that it will turn into the next Falklands," a Foreign Office source told the Financial Times. "Not in terms of starting a war, but getting to such a stage that it infects all other parts of the bilateral relationship."

In 2002, the Blair government proposed that the UK and Spain share sovereignty of Gibraltar an idea that Spain greeted lukewarmly and only as a transitional move towards full Spanish sovereignty. But it was rapidly quashed by a referendum of the Rock's 30,000 residents: 98% said they wanted to stay British a wish the UK has promised to respect and defend.

Is it still a strategic asset?

It used to be. In 1850, Lord Palmerston dispatched the Royal Navy to Piraeus and blockaded the Greek port for two months, to defend the honour and property of Gibraltarian merchant, David ("Don") Pacifico. Britain's 'gunboat diplomacy' was famously successful: the citizen of the Empire won £500 in compensation. But now, Gibraltar's position at the entrance to the Mediterranean is not quite so important.

It's still useful as a communications and intelligence post, as a naval stopover and repair shop. But the naval base, which as recently as 1982 accounted for 60% of the local economy, has shrunk greatly it now accounts for 6% of Gibraltar's GDP.

What's taken its place?

In the past 30 years, the Rock has turned itself from a low-to-middle-income economy, living off providing support to the Ministry of Defence, to a beacon of prosperity with a more diverse base tourism, financial services, and a centre for online gambling businesses.

Last year, GDP grew 7.8% to £1.2bn: GDP per head is among the highest in the world. The unemployment rate is just 2.5%. Spain accuses Gibraltar of being a tax haven: its corporation tax rate is 10%, compared to Spain's 30%. Gibraltar counters that its wealth spills over into Andalusia in the form of investment and the 7,000 Spaniards who cross the border every day to work.

Why are relations suddenly so tense?

Some MPs from Spain's ruling Popular Party blame Fabian Picardo, who took over as Gibraltar's chief minister last November. It's true that Picardo is a proud Gibraltarian, determined to protect the Rock's British sovereignty. And his rhetoric in recent weeks likening the Madrid government's tactics to those of North Korea has been fiery.

However, the dispute seems to have far more to do with Spanish domestic woes. Since taking power last year, the centre-right Popular Party has taken a more populist line on Gibraltar and the rhetoric has intensified as Prime Minister Mariano Rajoy finds himself under growing pressure over the economy and a corruption scandal.

What will happen?

Whatever accommmodation the UK and Spain come to on border checks, the contrast between Gibraltar's success and the economic misery in Spain is striking. "Quite apart from fundamental and historical political concerns, what is Spain offering to Gibraltar? To extend a 40% unemployment rate south of the border," says Peter Montegriffo, a lawyer and the Rock's former trade minister. "Even if there was no political dimension, that is simply not a proposition that anyone here is going to sign up for."

How did Gibraltar become British?

Anglo-Dutch naval forces seized Gibraltar in 1704 during the War of the Spanish Succession, a series of wars in western Europe that were essentially about imperial Spain's fading strength and its impact on the international balance of power.

When Charles II of Spain died without an heir, powers including Britain, the Netherlands, and the Holy Roman Empire (at that time, mostly modern-day Germany and Austria) feared France and Spain would unite, creating a dangerous superpower. Eventually, the combatants agreed in the Treaty of Utrecht (1713) to recognise the French king's grandson as Philip V, king of Spain, as long as he was barred from the French succession. Britain kept Gibraltar as part of the deal.