By Alastair Macdonald and Jesús Aguado
BRUSSELS/MADRID (Reuters) - The European Union on Friday offered Spain a right of veto over the future relationship between Gibraltar and the EU after Britain leaves the bloc, a move that could smooth Brexit talks but also dash Gibraltar's hopes of winning a special status.
The future of Gibraltar, a rocky British enclave on Spain's southern tip, is set to be a major point of contention in the exit talks along with issues relating to Britain's access to the EU's single market or the future rights of EU citizens in the UK and of Britons living in Europe.
Rows between Spain and Britain over Gibraltar have held up entire EU deals in the past – including current legislation governing air travel – and Brussels is keen to avoid a new bilateral dispute getting in the way of an orderly Brexit.
"This seems intended to give Spain something so they don't try to hold the whole withdrawal treaty hostage over it," one senior EU diplomat said in Brussels.
According to the EU's draft joint position on the exit talks, which the remaining members are due to approve on April 29, "after the United Kingdom leaves the Union, 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."
In essence, it offers Madrid a special share of power over Gibraltar's fate, but only once the territory is no longer an internal EU problem.
A spokesman for the Spanish government said Madrid was satisfied with the decision.
"It is what we wanted and what we have said from the beginning... The recognition by the European Union of the legal and political situation that Spain has defended fully satisfies us," Inigo Mendez de Vigo told a news conference following the weekly cabinet meeting.
The Government of Gibraltar issued a statement on Friday evening saying that the draft suggested Spain was trying to get away with mortgaging the future relationship between the EU and Gibraltar.
"This is a disgraceful attempt by Spain to manipulate the European Council for its own, narrow, political interests (...) a clear manifestation of the predictably predatory attitude that we anticipated Spain would seek to abusively impose on its partners," the Chief Minister of Gibraltar, Fabian Picardo, said in an e-mailed statement.
Picardo also said the draft would not change anything regarding "our continued, exclusive British Sovereignty".
Spain, which claims sovereignty over "the Rock", which it ceded in 1713, has frequently irritated its EU partners with attempts to use EU negotiations to put pressure on Gibraltar.
Since Britain's Brexit vote nine months ago, however, attitudes have shifted significantly, EU diplomats say.
"The British didn't give a damn about Gibraltar and they created this situation themselves," a second senior EU official said. "No one is going to blame the Spanish for taking advantage."
Gibraltar rejected the idea of Britain sharing sovereignty with Spain by 99 percent to 1 percent in a 2002 referendum, but voted overwhelmingly to remain part of the EU in last June's Brexit vote.
The British government declined to comment on Friday although Prime Minister Theresa May said on Wednesday in her statement to parliament on the triggering of Article 50 that London remained opposed to negotiating any transfer of sovereignty unless the Gibraltar people approved.
Gibraltar's border with Spain was closed by former dictator Francisco Franco in 1969 and only reopened in the 1980s.
It has said it wanted to negotiate a "special status" with the EU after the British exit, something Spain signalled it was ready to discuss without abandoning its claims for joint sovereignty over the disputed territory.
(Additional reporting by William James; Writing by Julien Toyer; Editing by Toby Davis and Hugh Lawson)