[Mobhack]

If Spain were to overtly side with the Axis, they would immediately lose thier major source of imported foodstuffs. Which the axis could not cover for as they had thier own problems with a lack of food and fuel. Spain was recieving its food and coal etc. imports from the Allies, not the Axis. Spain was a large importer, they could not make enough food at home.

Then they would be subject to naval and commando raiding, strategic bombing and actual invasion from those Allied forces, while now starving and running out of fuel supplies.

if the Germans then tried to send a force across Spain to deal with Gibraltar (as Spain would not be able to take the rock themselves) - there is the problem of poor rail and road infrastructure to move and supply such an expeditionary force across Spain itself, which would have to be supplied from germany through occupied france as Spain could not provide any supply for them. The Allies would of course interdict the long supply lines of that german expeditionary force.

Franco deliberately stood aside from throwing in with the axis because he knew that he would be toast if he did so, and limited himslelf to allowing the Azul division of volunteers to go off to the Eastern front, thus divesting Spain of some of the more reactionary right-wing types he didnt really want hanging around at home anyhow. And most (all?) of the kit and food and fuel for azul was german supplied, so it did not cost franco to supply weapons gas and ammo - germany did that out of thier own wallet for him. Germany liked the Azul division as good propoganda for thier "cause", and so friendlier relations spain-germany for franco at very low cost to him. Azul division was a win-win for franco therefore!.