Aug 17, 2016 | 09:15 GMT

4 mins read

What the Brexit Means for Ukraine

What the Brexit Means for Ukraine
Forecast Highlights

  • Following the Brexit vote, the European Union will likely place a lower priority on integration projects with Ukraine as it focuses on internal matters.
  • Depending on its terms and timing, the United Kingdom's exit from the European Union could hurt Ukraine economically and politically.
  • Over time, this could weaken support for the Ukrainian government, which has prioritized closer cooperation with the European Union.

In the years since the Euromaidan uprising, political and economic integration with the European Union have become a cornerstone of the administration led by Ukrainian President Petro Poroshenko and Prime Minister Volodymyr Groysman. Poroshenko came to power in 2014 after President Viktor Yanukovich was deposed following months of protest inspired by his refusal to sign a trade agreement with the European Union. As one of his first acts in office, Poroshenko began negotiations to revive the agreement that his predecessor had rejected, and EU accession has been a primary goal for his government ever since. Now, the uncertainty created by the United Kingdom's vote to leave the European Union has thrown Ukraine's future in the bloc — and the legitimacy of the government in Kiev — into doubt.

From an economic standpoint, the Brexit could have serious consequences for Ukraine. The United Kingdom is the second-largest economy in the European Union, which accounted for more than 40 percent of Ukraine's exports in 2015. Though the United Kingdom itself is only Ukraine's 11th-largest trade partner, bilateral trade between the two countries still exceeded $2 billion last year. Once the United Kingdom leaves the bloc, this trade activity and the association agreement with Ukraine that the United Kingdom is currently party to as an EU member could be compromised.

A Worrisome Prospect

Beyond the economic effects, the Brexit vote risks accelerating the European Union's fragmentation, a worrisome prospect for Kiev. After Moscow annexed Crimea and began supporting the pro-Russia rebellion in eastern Ukraine, the European Union imposed sanctions against Russia, and it has since kept them in place. But the Brexit vote has called into question the future of the sanctions. Even before the June 23 referendum, countries such as Hungary, Greece and Slovakia had expressed their misgivings about prolonging the measures, which hurt their economies, too. Germany, the European Union's de facto leader, managed to persuade its fellow member states to maintain sanctions as long as the Minsk protocols are not implemented, and in June, EU members voted unanimously to extend them through January 2017. There is a real possibility, however, that sanctions will be eased or lifted at the next vote in early 2017.

Ukraine has worked feverishly to prevent such an outcome, lobbying the European Union to continue the sanctions. After all, the basic security components of the Minsk agreements have not been met, and cease-fire violations occur regularly along the line of contact in eastern Ukraine. On June 27, just a few days after the Brexit vote, Poroshenko flew to Brussels to talk with EU leaders about the implications of the vote for Ukraine and to urge continued solidarity on Russian sanctions.

Wishful Thinking

Despite the turmoil in the bloc, Ukraine's leaders are hopeful about the prospect of EU accession. Groysman affirmed July 1 that he was sure his country would be in the bloc in 10 years. Still, this is likely wishful thinking on the part of the Ukrainian government. Prior to the Brexit vote, the European Union was wary of accepting new bids for membership, thanks to the economic and refugee crises plaguing the bloc. In early June, it postponed granting Ukrainian citizens visa-free travel privileges. The EU enlargement commissioner recently said he expected the visa waiver to be granted in October, but the current upheaval in the bloc puts the agreement at risk of further delay.

Nonetheless, the Brexit vote does not necessarily spell trouble for EU-Ukrainian relations. Instead of precipitating the bloc's decline, the United Kingdom's exit could give rise to a more efficient and effective iteration of the European Union. And regardless of its enduring financial and economic problems, the European Union still represents a brighter and more prosperous future for many Ukrainians. Integration with the bloc, moreover, has been a driving force behind the Ukrainian government's efforts at political and economic reform. If the Brexit leads to the European Union's unraveling, Ukraine could stray from the course it has been following since the Euromaidan revolution. Though the country is unlikely to return to a strategic alliance with Russia, without a viable counterweight to Moscow's influence, the political pressure on Kiev would rise, leaving Ukraine increasingly vulnerable. 

Lead Analyst: Eugene Chausovsky

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