This Thursday promises to be a critical moment in the history of the west. On that day, residents of Scotland will decide whether they intend to remain a part of the United Kingdom or form their own sovereign nation for the first time in centuries. If a majority of Scots vote “yes,” their decision will dramatically shrink the borders of the United Kingdom, upend politics in London, add a new sovereign member to the European community, and possibly embolden other separatist movements around the world. Even if Scotland opts to stay put, the fact that it got so close to independence could spur major political concessions from an anxious U.K. government.

Close video Scottish independence: What you need to know Matt Wells of The Guardian explains everything you need to know about the upcoming vote for Scotland’s independence. Matt Wells of The Guardian explains everything you need to know about the upcoming vote for Scotland’s independence. share tweet email Embed

Even a “no” vote means a tectonic shift of some kind. But a “yes” vote would mean a true political earthquake, with unpredictable results. If the people of Scotland reject unity with the United Kingdom – if they say, in the words of the pro-independence campaign, “Yes Scotland” – then it could take years before a new status quo emerges within the British Isles. Below are some of the questions that have not yet been answered about an independent Scotland.

1. Does Scotland stay on the pound?

Exiting the U.K. doesn’t necessarily mean leaving its currency behind. Alex Salmond – Scotland’s First Minister and the head of the pro-independence Scottish National Party (SNP) – has promised that an independent Scotland would continue to use the British pound, “come what may.” But that might not be a realistic promise, given that the British government seems reluctant to enter a Euro-style currency union. So even if Scotland did stay on the pound, that could mean its own currency would be out of its control. With no central bank of its own, Scottish monetary policy could wind up entirely at the mercy of the Bank of England. It’s not a perfect analogy, but imagine what would happen to the U.S. economy if the United States Federal Reserve was owned and operated by the Canadian government.



Alternatively, Scotland could develop its own, new currency. Or it could adopt the euro, although that might not look like a particularly attractive option given the dire economic circumstances of many Eurozone nations. Either way, the currency question is not a settled issue.

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2. Who gets the oil?

The pro-independence movement likes to tout the claim that Scotland on its own would be the fourteenth wealthiest nation on Earth, at least in terms of GDP per capita. A substantial portion of that wealth comes from oil drilling in the North Sea: Despite falling revenues, the Scottish oil industry still added about £22 billion (more than $30 billion) to the local economy in 2012 and provides jobs to roughly 200,000 Scots. But if Scotland parts ways with the United Kingdom, it would need to negotiate its new territorial waters with London. And that means a debate over how much of the oil-rich North Sea waters they would have under their control going forward.

3. And how much oil is there anyway?

Remember that part about declining revenues? Oil is a finite resource, and there’s been a lot of debate recently about just how much the North Sea has left to give. Unsurprisingly, the Scottish government and the London-based Office for Budget Responsibility have issued very different projections on that front, although both at least agree that North Sea oil revenues as a share of Scottish GDP are likely to decline over the long term. The best case scenario is that North Sea oil could make Scotland a lot like Norway: A prosperous, Northern European nation that uses enormous oil revenues to fund a generous social safety net. But if there’s not enough black gold in Scottish territorial waters to make that a reality, then the newly independent nation could find that it isn’t as rich as it thought it was.

4. Does the financial industry stick around?

If independence happens, the Royal Bank of Scotland – one of the major financial institutions of both the United Kingdom and the world – might relocate its headquarters to London. Same goes for another large player in the financial sector, Lloyds Banking Group. However, much of both companies’ jobs and facilities would likely remain in Scotland, and RBS has promised “no impact on everyday banking services used by our customers throughout the British Isles.”

So why move at all? Mainly to stay within the orbit of the Bank of England, which acts as the “lender of last resort” to U.K. banks. In other words, when major British banks are in crisis and are unable to obtain credit from other corners, the Bank of England is able to step in and prevent their collapse. According to Bank of England Governor Mark Carney, an independent Scotland would need to build up some serious currency reserves if it is going to act as a lender of last resort in the Bank of England’s stead.

5. Does Scotland join the EU? What about NATO?

The United Kingdom is, of course, a member of the European Union, although it does not use the euro as its official currency. First Minister Salmond has insisted that Scotland would automatically retain E.U. membership even if it exits the U.K., although the reality might be a little more complicated. European Commission President Jose Manuel Barroso says Scotland, rather than simply inheriting the United Kingdom’s membership, would have to apply for entry into the union.

If a newly independent Scotland has to start over from scratch, that could present some significant challenges. First off, Olli Rehn – the former European Commissioner for Economic and Monetary Affairs and the Euro – has suggested the E.U. will never accept Scotland’s application if it stays on the pound without entering a formal currency union agreement with the U.K. (see above). Second, other EU member-states might not accept Scotland’s application unless the country agrees to adopt the euro as its new currency. But Salmond is opposed to entering that monetary union, and for good reason: The so-called eurozone is still economically struggling, especially in less fortunate states such as Spain and Greece.

Similar issues apply to Scotland’s desire to be a NATO member. The Yes Scotland campaign says it “supports continued membership in NATO,” but only if the newly independent nation isn’t required to keep nuclear weapons within its borders (currently the U.K. maintains a fleet of submarines equipped with nuclear weapons in Scottish waters). But opponents of independence say NATO is unlikely to admit a state free of nuclear weapons, and NATO itself has warned that an independent Scotland would have to renege on its promise of defense budget cuts if it is to have any chance of joining.

6. What happens to U.K. politics?

If the U.K. loses Scotland on his watch, Conservative Prime Minister David Cameron is probably toast. But what’s bad news for the country’s center-right ruling party isn’t necessarily good news for its main center-left opposition party. A decent chunk of the Labour Party’s power base relies on unification: Forty-one of the 258 parliamentary seats that the party won last election came from Scotland. As a result, Labour leader Ed Milliband has nearly as much of an interest in preventing independence as Cameron does. If the U.K. loses Scotland, then Milliband loses all of those votes.

7. What happens to retirement benefits?

Part of the rationale for independence is that Scotland, once freed from Westminster, might be able to improve state retirement benefits across the board. But the pro-unity faction argues that an independent Scotland would not be able to afford more lavish retirement benefits, especially given its aging workforce. The warnings of a so-called “population bomb” of retirees seeking pension benefits should sound familiar to anyone living in the United States or most other developed nations; but the anti-independence group Better Together argues that pension costs are going to rise faster in Scotland than the rest of the United Kingdom. If Scotland can’t share those costs with England, North Ireland and Wales, the argument goes, then the cost of retirement benefits is only going to become more onerous.

8. Will other separatist regions try to follow suit?

It’s no exaggeration to say the whole world has its eyes on Scotland right now, other separatist movements included. Quebecois secessionist in Canada and pro-independence Catalonians in Spain certainly have their eyes on how the referendum goes. Even ethnic Kurds in Iraq might try to follow Scotland’s example. It remains to be seen whether a successful bid for independence would inspire renewed calls for secession from other political movements across the globe.