Let's assume that Franco and Hitler somehow reached an agreement at Hendaye on October 23, 1940, and Spain entered the war on the Axis side. What impact would this have had on the course of the war?
My initial thoughts are that it would have greatly lengthened the war, though the end result would still have been an Axis defeat. If agreement had been reached, German forces would likely have attacked and occupied Gibraltar by the end of 1940 or early 1941. This alone would have been a huge blow for the Allies. Without Gibraltar, there would have been no reasonable way for Britain to resupply the forces in North Africa. Without reinforcements and supplies, the North African army would have been defeated and Egypt occupied by Germany and Italy in 1941.
This throws open a huge range of implications for the rest of the war. With North Africa secured, the extra resources and divisions that were diverted there throughout the course of the war would have gone East. Though this would have been just a trickle in comparison to the flood that already existed, every little bit would have helped. In addition, we might well have seen Rommel operating against the Soviets. I don't know know whether this would have made any difference, but it is possible.
Another consequence of the loss of Egypt would have been to open up the possibility of a German push on the Soviets from the Middle East. Could the Caucasus have been secured if they had been attacked from the south as well as the north in 1942? If they had, would it have made any difference?
Spain itself would likely have attempted a push on Portugal. First, could Spain have achieved victory there? Britain may well have diverted the forces that were unable to reach North Africa to Portugal, and Spain was still devastated from the Civil War. The Spanish Army would likely have been even less effective than the Italian Army. Still, Britain did not have much left to contribute. It is possible that Monty could have made his name there like a second Wellington, but it is equally possible that they could have been pushed out quickly or even refused to commit in the first place. A Portuguese Resistatance movement would likely have sprung up and bled Spainish forces severely.
When the US finally entered, would Torch still have gone into North Africa, if there were no British forces to meet up with? Could Torch have instead targetted Portugal? Would the 'soft underbelly' have been Spain instead of Italy?
Other factors to consider: U-boats based in the Canaries and the Azores? Does Britain lose Burma to Japan due to the loss of Suez? Is India seriously threatened by Japan?
What does this all mean? Certainly the Allies would be slowed in their push into Western Europe. If D-Day is June 6, 1945, can the Soviets keep to their real-world timeline? If not, how long are the Soviets delayed by the changes to the German plan? If so, does all of Germany, Austria, Italy, Greece and Scandanavia fall under the Iron Curtain? Do the Soviets capture ALL of the German physicists and rocket scientists?
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