The Nation That Tried to Invade England in 1588 May Become Its Best Friend

U.K. officials see Spain as a potential chink in the armor of the European Union as it heads into the diplomatic fray that will start after Prime Minister Theresa May formally triggers the Brexit process, according to people familiar with her government’s planning, Bloomberg reported.

Accused of adopting divide-and-rule tactics, May’s government has already embarked on a charm offensive with the smallest and newest members of the EU in the east. Now, it has a core member of the euro area in its sights as it tries to pick off the allies it needs to secure a sweeping free-trade agreement once it leaves the bloc, one of the people said.

Spain is an ideal candidate as long as the thorny issue of Gibraltar can be resolved. For starters, there are deep trade and tourism ties between the two countries that Prime Minister Mariano Rajoy will want to maintain as he oversees unemployment running at twice the bloc’s average.

“In what relates to the core of Brexit -- the U.K.’s departure from the interior market and the EU, and its re-connection as a trade partner -- Spain will be a dove,” said Ignacio Molina, a senior analyst at Real Instituto Elcano, a Madrid-based think tank. While Spain won’t break European unity, “it is in the soft Brexit camp,” he said.

An Understanding

May is readying to formally begin the divorce process this month and has seen most informal overtures to key players rebuffed as EU members were told to enforce a policy of no negotiations before official notification. El Confidencial reported at the weekend that Spain will support the European Commission’s tough line on Brexit.

Yet, at an EU summit in Malta earlier in February, May and Rajoy were said to have struck an understanding.

The pair agreed they wanted to reach an early agreement on reciprocal residency rights for their citizens, according to British officials. May’s team in London believe Rajoy could also make a powerful ally during complex trade negotiations that will form part of Brexit talks, one official said.

Almost 18 million Britons, a number equivalent to almost a third of the U.K. population, visited Spain last year. Spanish companies also export far more to the U.K. than the other way around.

Scotland, Catalonia

While more than 300,000 Britons are registered as residents in Spain, compared with 130,000 Spaniards in the U.K., the number of Britons living at least part of the year in the southern European country could be as high as 1 million. Spending by British tourists accounts for about 1.5 percent of Spain’s gross domestic product.

Another reason for Spain and the U.K. to unite is that in Scotland and Catalonia they both face independence movements that an amicable Brexit deal could help to quell.

“The government will use our strong and valued bilateral relationships with our EU partners to seek a good deal for U.K. citizens overseas as soon as possible,” British Ambassador in Spain Simon Manley in a February speech in Marbella, Andalusia. “We stand ready to reach such a deal right now if other countries agree.”

Links built also on corporate investment mean Rajoy has more to lose than other EU leaders if Brexit talks go wrong as Spanish companies have as much as 122 billion euros invested in the U.K.

Santander’s Shadow

For example, Banco Santander SA, bought mortgage lender Abbey National in 2004, while Ferrovial SA runs Heathrow Airport. Iberdrola SA owns Scottish Power and International Consolidated Airlines Group, the parent of British Airways and Iberia, is registered in Madrid.

At the same time, Madrid is seeking to lure banks from London, pointing to its climate and labor laws that are easier than those of Germany and Paris. UBS Group AG and Citigroup Inc. are among those scouting locations in Spain.

Spain will work toward the “most orderly” Brexit that “creates the fewest problems for British and Spanish citizens,” Rajoy said back in January. “We will try to preserve the economic benefits of a very intense relation, but that has to be done from the basic and founding principles of the European Union.”

In the British popular imagination, the Spanish are old adversaries from the time their “Invincible Armada” was sunk at sea to their siding with the French at the Battle of Trafalgar in 1805.

The dispute over Gibraltar, placed under British control in 1713 under the Treaty of Utrecht, is a present-day reminder of the conflicts of the past. A House of Lords panel said Wednesday that Britain has a “moral duty” to promote the interests of the territory and to maintain a “free-flowing” border.

“While the Gibraltar issue will no doubt be important, as will Scotland, depending on how the issue is managed, Spain knows that there are more important issues,” Molina said.