OFFSHORE ROCK

Developments concerning the latest deterioration of the Argentinian-British dispute over the Falkland Islands are still fresh in memory, and London already is forced to recall another of its long-term problems - this time the dispute with Spain over Gibraltar.

Gibraltar, a small area of 6.5 square kilometres, is in fact a coastal cliff (Plato counted it among the Pillars of Hercules, and now it is often simply called the Rock) with a rich history. So many set their foot on it - the Phoenicians, Romans, Vandals and Goths, Moors. For a long time it was part of the Kingdom of Castile and then the combined Kingdom of Spain. Everything changed after the War of Spanish Succession when the British and Dutch troops captured Gibraltar and, according to the Treaty of Utrecht in 1713, it finally came under the control of the British Crown, becoming one of the strategic outposts of the empire in the Mediterranean. Spain subsequently repeatedly tried to restore its sovereignty over Gibraltar, but all attempts failed. Modern attempts that basically boil down to either political statements, or the Spanish royal family ignoring invitations to celebrations held by the British monarchy, can hardly be described as successful.

Thus, when on 13 July Gibraltar widely celebrated the three hundred year anniversary of the signing of the peace treaty of Utrecht, for Madrid this was not a happy occasion. Spain periodically recalls that it would be nice to get London to agree to the final decolonization of the Iberian Peninsula, but the British are not going to negotiate and Gibraltar, which is inhabited by 30,000 people, is still considered one of the British Overseas Territories (formerly known simply as colonies).

The centuries-old dispute entered a new phase on 24 July, after the Gibraltarian authorities decided to construct an artificial reef off the coast and submerged in water 70 blocks of concrete. This was attributed to the need to improve the state of the marine ecosystem of flora and fauna. However, the Spanish fishermen have a quite different view on this subject. People, for many of whom the sea is the only source of livelihood, believe that the reef interferes with their work - for example, it tears fishing nets. On 24 August Spanish police decided to take apart concrete blocks. In addition, police divers unfurled underwater the Spanish flag, took pictures against its background and then posted them on Twitter.

But the Spaniards did not limit themselves to this. Madrid has also introduced enhanced control on the Gibraltar border checkpoint. Trucks with sand for the construction of luxurious relaxation areas were not allowed to enter Gibraltar. As a result, large pedestrian and vehicle queues formed on the border. According to the Spanish authorities, such border controls are justified. Moreover, Madrid threatened to set a fee (about 50 euros) for entry into the enclave.

As a result, the EU executive and judiciary officials were inundated with complaints. The government of Gibraltar decided to refer to the European Commission all complaints from citizens unhappy with queues, who believe that it violated their right to free movement in the united Europe. In turn, the Ministry of Agriculture, Food and Environment of Spain has filed a lawsuit for Gibraltar's breach of agreements on environmental protection.

It should be noted that clashes with the British have occurred in the past. At sea, the British marine police often act against the Spanish fishing vessels and Civil Guard kingdom. In the past, the friction also concerned the airspace sport. However, so far there have been no major incidents.

Meanwhile, it seems that the main cause for the deterioration of British-Spanish relations over Gibraltar is completely different. The Rock is in fact a tax haven, an offshore area where about 90,000 registered banks and investment companies from around the world operate. The main source of income is the financial sector and revenue from online casinos. To get to Gibraltar, one needs a visa to British overseas territories. Furthermore, this area is a member of the European Union through the UK membership, although the Rock, for example, is not subject to the common agricultural policy, or regulations of customs duties of the EU. In Gibraltar it is also possible not to levy the value added tax. And the owners of online gambling businesses are also at ease in Gibraltar.

Recently, however, the importance and role of offshore zones in the global economy's regulation was significantly revised. Epiphany came after the global financial crisis of 2008. Although no one is going to destroy offshore zones, the global economic elite now ponders the need for greater control and access to information in respect of banking secrecy and financial flows. The havens that provide businesses with shelters haven from taxes and power pressures of the state have been recognized as quite possible culprits of budget deficits. While Spain, as many countries in Europe, is suffering from the crisis and rampant unemployment, the British overseas territory it is currently thriving. Economic growth in Gibraltar in 2012 was 7.8 %, unemployment stood at just 2.5 %. Unemployment in Spain is 26%, and among young people it exceeds 50 %. The annual income of every resident of the enclave is at times almost 30,000 more than the income of a citizen of Spain, for example a resident of the neighbouring Andalusia.

Thus, behind the words of the Spanish authorities that their actions are meant to protect not only the country, but the entire European Union, you can hear the voice of Brussels. As a result of the pressure of European politicians Gibraltar has already been forced to cancel the zero income tax on companies, and now it stands at 10% (for comparison it is 30% in Spain,). Also under pressure from the EU authorities Gibraltar had to revise the rules for opening accounts, signed with a number of countries agreements on the exchange of financial information, and introduced the requirement for companies to produce balance sheets annually.

But, apparently, these measures were not enough. Spanish Prime Minister Mariano Rajoy called on the European Commission to investigate whether "there is a breach of European legislation regarding taxation, smuggling and money laundering" in Gibraltar. Spain thus hints at the passage via Gibraltar of millions of cheap tobacco products, and every year the volume of illegal trade grows. European Commission President Jose Manuel Barroso has promised to send to Gibraltar a special commission to monitor the work of border guards in early September. Incidentally, David Cameron asked him the same. The British prime minister is certain that the actions of the Spaniards are politically motivated and violate the rights of European Union citizens. 

There is a real possibility that the conflict may spill over into the international arena. Madrid already threatens with debates in the UN and seeks to recruit for its cause Argentina. According to some reports, the Spanish interior minister is even preparing to head for Buenos-Aires next month to discuss the possibility of raising in the UN the question "on eliminating the remnants of the British colonial empire".

However, observers have recognized the futility of Madrid's threats. First, London as a permanent member in the UN Security Council has little to fear from UN debates. Second, Spain itself has yet to fully shed its infamous colonial past and still owns two outposts in the territory of Morocco. Third, in a referendum held in 2002 Gibraltarians unanimously rejected the idea of sharing administration with Spain. Incidentally, at the recent referendum on the political status of the Falkland Islands with a turnout of 91% almost all voters (99.8 %) also voted to retain the status of an overseas territory of the UK. And finally, Madrid itself is not too keen on outright confrontation with London. For example, during a visit to London in 2012 Spanish Prime Minister Mariano Rajoy did not address the question of Gibraltar. Spain was also told that with their current claims to the Gibraltar authorities' actions the government may be trying to divert the attention of its citizens from the major economic and political problems.

At the same time, and the British are more than determined. Some of the politicians of Albion even recalled the victorious Falklands campaign in 1982. Hence, just in case they sent to the Rock the frigate "Westminster" (the official version is to conduct routine exercises in the Mediterranean). London also mentions the possibility of filing a lawsuit against Spain in the European Court.

Thus, it seems that the war of the Spanish Succession will continue depending on how the international community will learn to cope with the crisis and whether Spain itself can climb out of the debt trap. Also it is interesting to watch and to see how the relationship between the UK and Brussels will develop in the future. Losing economic, social and other benefits of being in the EU can force Gibraltarians to radically rethink their British priorities...