Spain's neutrality endured despite its fascist dictatorship because the strategic return from invasion looked limited. The country had been badly damaged by civil war, and its geography made an occupation expensive. Iceland, by contrast, was occupied by Britain because control of the island served a clearer wartime purpose. Spain also had little ability late in the war to alter the balance by intervening across the Pyrenees. Neutrality protects a state when belligerents judge its territory more useful left alone, since the declaration itself cannot control their choices.
Notable Point · 52:29-54:17
Neutral Spain survived because both coalitions found it useful
Spain remained outside the war not because neutrality was absolute, but because invasion was costly and neither coalition saw enough advantage in using Spanish territory.