Just as the U.K.’s exit from the European Union poses challenges for the Irish border, it may complicate life on and around Gibraltar. The rocky outcrop at Spain’s southern tip has been British territory for 300 years, and its 2.2 billion pound ($2.9 billion) services economy relies on frontier workers coming from Spain for about half of the labor force. As the EU and the U.K. sealed their divorce, Spain sought guarantees that it will have a decisive say in any talks on the future of Gibraltar.

1. How does Brexit apply to Gibraltar?

The 6.8 square-kilometer enclave is a self-governing British overseas territory, like Bermuda or the Falklands Islands. As such, most of its 34,000 residents are British citizens, who voted almost unanimously in a 2002 referendum to remain under sole British sovereignty. At the same time, Gibraltar is physically part of Europe’s mainland, with deep ties to neighboring Spain -- which questions the legal basis of the U.K.’s claims to the territory ceded to Britain under the 1713 Treaty of Utrecht, which ended the War of the Spanish Succession between European powers led by England and France. In the 2016 Brexit referendum narrowly won by anti-EU forces, 96 percent of Gibraltarians voted in favor of remaining in the EU.

2. What changes could Brexit bring?

As the U.K. and EU enact their separation, Gibraltar’s border with Spain -- like that between the Republic of Ireland and Northern Ireland -- will become a divide between EU and non-EU. Unlike Ireland, Gibraltar isn’t part of the existing EU customs union, so goods being imported and exported are already subject to a tariff. But a pragmatic approach has governed the passage of people, which has generally meant rapid or no passport checks when moving between Spain and Gibraltar. If that were to change, there could be major repercussions. Back in 2014, during a series of incidents between boats of the Spanish Civil Guard and the Gibraltar police, the Spanish government imposed border controls that caused long lines for commuters and significant economic disruption.

3. What does this mean for life in Gibraltar?

Potentially a great deal. Gibraltar’s economy is based on services including banking, insurance and online gambling to the U.K. and other countries. More than half of Gibraltar’s 27,000 jobs are filled by workers who live in the surrounding area, known as Campo de Gibraltar. Their salaries, plus the business of supplying Gibraltar, are a lifeline for Spanish towns close to the border, where the unemployment rate is about double the nation’s average. High unemployment is already one reason why Linea de la Concepcion, the closest town to the border, is known as a gateway for illegal drugs entering the EU.

4. Could Spain end up with control of Gibraltar?

That’s highly unlikely. The U.K. has always said it would defend Gibraltarians against Spain’s claims to sovereignty, a pledge strengthened by the result of the 2002 non-binding referendum. Actually sovereignty and Gibraltar’s airport -- another contentious issue for the Spanish -- haven’t been part of the bilateral talks between the two sides as both focused on more pragmatic matters such as protecting the rights of its citizens who work on Gibraltar. The U.K. and Spain have been able to hammer out a series of bilateral accords to provide a framework for cooperation on issues such as citizens’ rights, the environment, police and customs matters, and taxation.

5. Why does the U.K. have to negotiate directly with Spain?

The guidelines for the Brexit negotiations, approved in March 2017 by the U.K. and EU, state that “no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.” That language implies that any agreement on, say, financial and insurance services between the EU and U.K. will apply to Gibraltar-based businesses only if Spain approves.

6. Why is Gibraltar important to the U.K.?

Its location on the narrow strait separating Europe and Africa makes it strategically significant, and the Royal Navy’s Gibraltar Squadron patrols the territorial waters. Using Gibraltar as a stronghold, British forces were able to control naval traffic passing between the Atlantic Ocean and Mediterranean Sea during World War II; U.S. General Dwight D. Eisenhower planned the allied invasion of North Africa from headquarters inside the Rock of Gibraltar’s tunnel system, which was made to protect British forces from Germany’s Luftwaffe.

7. Have I seen that rock before?

The Rock of Gibraltar is familiar to Americans as the logo of the Newark, New Jersey-based insurance company Prudential Financial Inc., whose advertising promises customers they can “Get a Piece of the Rock.” (As it happens, insurance is one of Gibraltar’s leading industries.) Gibraltar was also the place chosen by John Lennon and Yoko Ono to celebrate their wedding away from the crowd of photographers and reporters in 1969, an adventure described in “The Ballad of John and Yoko.”

--With assistance from Dara Doyle and Emma Ross-Thomas.

To contact the reporters on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net;Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Leah Harrison Singer, Flavia Krause-Jackson

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