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Mistral Deal - 2014

In the wake of the crisis in Ukraine, the United States pressed France as well as Britain and Germany to take a tougher line against Russia and cancel the Mistral contract. But France refuses to link the helicopter carrier deal to the US/EU debate over tougher sanctions against Russia. A French government official travelling with President Francoise Hollande 11 May 2014, who asked not be named, told reporters that the contract was too big to cancel and that if France didnt fulfill the order it would be hit with penalties.

French Foreign Minister Laurent Fabius said on 17 March 2014 that the possibility of cancelling the Mistral deal was among the measures in the framework of the third wave of sanctions against Russia. French President Francois Hollande said on March 7 that France will continue implementing the contract on supplying the two Mistral vessels to Russia. France is complying with the conditions of the agreement signed, the parties are not at a stage of dissolving the contract and it is hoped that this will be avoid, Hollande said.

Russia will demand France repay all damages, if the Mistral deal is broken off, Russian Deputy Defense Minister Yury Borisov told reporters on 20 March 2014. "Of course, Russia will defend its right to the end in accordance with the agreements concluded and will demand repayment of all damages we could sustain in the case that the Mistral contract is broken off," Borisov said in regard to the statement of French officials on the possible cancellation of Mistral helicopter-carrying vessel supplies to Russia as sanctions for Crimea's accession to Russia.

The contract, concluded between Rosoboronexport and French ship-builders, stipulates punitive sanctions for cancelling the deal, Borisov said. "I think that it is too early to voice them. It has not come to this. I hope that France will weigh everything clearly, all pluses and minuses of this contract and makes a right decision," Borisov said. If France breaks off the Mistral deal, this will affect its international reputation first of all, Borisov said. "As you understand, the case is not even this agreement, the case is the reputation of the state, which at a certain time concluded this agreement. This is losing the country's reputation as a partner with the entire international community," he said.

The western countries' sanctions against Russia that the EU and US officials were discussing as part of retaliation for Crimea' accession to Russia may threaten the interests of European business companies. Officials of the French companies DCNS and STX had voiced concern about the likely collapse of the deal to deliver Mistral-class helicopter-carriers to the Russian Federation. Paris may give up the contract for building Mistral-class amphibious assault ships for Russia as part of the western countries' economic sanctions against the Russian Federation, a move that may lay off 600 workers, engaged in the project. The collapse of the deal will also negatively affect the financial soundness of DCNS.

Moscow had already paid 1.2 billion euros to Paris, or more than a half of the contract sum. If breach of contract is also included in the economic sanctions package against Russia, France would have to pay the break fee. The penalty charge payments will make up the very same 1.2 billion euros. According to the Russian news agency, the sum comprises the cost of the contract for two ships and the punitive sanctions for the contractor's failure to perform their obligations.

In case the deal is annulled, the French will not get a significant part of the total contract sum, which is estimated in over one billion euro and which is paid after the contract is executedd. France would have to return to Russia all advance payments on this contract. Russia reserved the right to file a lawsuit regarding France to the international arbitration court in Geneva for not implementing contract obligations. The lawsuit could amount to several billion euro. It is unlikely that dock workers of the STX France company in Saint-Nazaire and unions would be thrilled with such response measures. The company was in a quite difficult financial situation and is surviving, to a large extent, thanks to the Russian order.

By mid-2014 the first of the two ships, the Vladivostok, was due to be delivered by November 2014 and the second, Sevastopol, was to arrive in St. Petersburg for a further fitting with Russian weapons systems in November 2015 and was to join the Pacific fleet in the second half of 2016.

Representative Eliot L. Engel (D-NY), the leading Democrat on the House Committee on Foreign Affairs, was joined by Rep. Michael Turner (R-OH), the Chair of the United States Delegation to the North Atlantic Treaty Organization (NATO) Parliamentary Assembly; and Rep. William Keating (D-MA), ranking member of the House Foreign Affairs Subcommittee on Europe, Eurasia, and Emerging threats, in calling on NATO allies to work with France to stop the sale of two Mistral-class warships to Russia. In a May 29, 2014 letter to NATO Secretary General Anders Fogh Rasmussen, the lawmakers urged NATO to purchase or lease the ships as a common naval asset for the alliance.

Weve seen that President Putin is willing to trample on his neighbors sovereignty in order to expand his power and territory. The last thing our allies should be doing is helping bolster his military strength. If France goes forward with this sale, these ships will enhance Russias ability to do exactly what they did in Crimea, said Rep. Engel. Instead, NATO should seize this opportunity to strengthen its own assets while at the same time denying Russia this additional capability.

Four hundred Russian sailors arrived 30 June 2014 at the port of Saint-Nazaire, France for training on Russia's first Mistral helicopter carrier, built at a French shipyard. Russia's training vessel, the Smolny, docked in the northwestern France port. Russian naval personnel, divided into two crews of 200 people, will be training on the Vladivostok one of two Mistral class vessels currently under construction in Saint-Nazaire. During the exercises, the sailors resided aboard the Smolny, which will become their floating barracks. The Russian sailors were to initially arrive in France on June 1, but the Smolny was damaged at Russia's Kronshtadt naval base and had to undergo repairs. After their training is complete, the crew was to deliver the Vladivostok to Saint Petersburg, where it will be equipped with the newest Russian weaponry. The handover ceremony of the Vladivostok vessel to the Russian side will take place in October or November.

French President Francois Hollande said 22 July 2014 that the plan to deliver the two Mistral helicopter carriers was made in Paris and will go forward despite calls from the US and UK. The Russians have paid. Should we repay 1.1 billion euros if the boat was not delivered to the purchaser? he asked while speaking to reporters late on Monday the night before EU foreign ministers are to meet in Brussels to discuss tougher sanctions on Russia over the Ukrainian crisis. British Prime Minister David Cameron said that the order is "unthinkable, calling for tougher sanctions and to halt all arms sales to Russia. The ship is nearly completed and will be presented in October.

"For the time being, a level of sanctions has not been decided on that would prevent this delivery," he said. The contract was signed in 2011, the boat is almost finished and should be delivered in October." However, it is not yet clear whether France will go through with the delivery of the second ship, which is planned for the end of 2015. "Does that mean that the rest of the contract - the second Mistral - can be carried through? That depends on Russia's attitude," Hollande said.

Defense Minister Itsunori Onodera told his French counterpart 29 July 2014 that Japan had strong concerns about Frances plan to sell two helicopter carriers to Russia. In a move meant to show support for its ally, the United States, Onodera told French Defense Minister Jean-Yves Le Drian, who visited Japan in late July, that the sale of amphibious assault ships to Russia will not be appropriate in view of the international situation since the recent downing of a Malaysian airliner in Ukraine. Onodera pointed out Russia's military buildup and increased activity in the Far East. He urged France to cancel the deal, citing its possible impact on Japan's national security.

Onodera told his French counterpart, Jean-Yves Le Drian,that Japan was "strongly concerned" about the plan. "'Strong concern,' in a sense, means we want them to stop the deal," Onodera told reporters. "The world is highly concerned about Ukraine and we are worried about the recent military buildup in Russia's Far East," he said. "If the ship is deployed to its namesake, that would be something that makes the whole world concerned."

France announced 03 September 2014 it would suspend delivery of the first of two Minstral-class warships commissioned by Russia because of concerns about Moscow's involvement in the conflict in eastern Ukraine. The announcement came in a statement by President Francois Hollande's office issued on the eve of a NATO summit in Wales. The move halted a deal worth $1.6 billion. Hollande's office called the situation in Ukraine "grave" and said Russia's recent actions threaten "the foundations of security in Europe." Following Russia's annexation of Crimea, the United States and Britain had criticized France's plans to go ahead with delivery of the advanced helicopter assault ships.

The defense capability of Russia and the Russian Navy will not suffer as a result of Frances decision to put the delivery of the first Mistral-class helicopter carrier on hold, Adm. Vladimir Komoedov, chairman of the defense committee of the State Duma, Russias lower house of parliament, said 03 September 2014. This will not undermine our combat readiness because this tin can will require a lot of getting used to, and will most likely come without a control system; and we dont really need a helicopter carrier vessel, Adm. Komoedov told RIA Novosti. Adm. Komoedov noted that the ship was actually not crucial for the Russian Navy, since Russia had all the necessary technology to build vessels not in any way inferior to their foreign equivalents, especially French ones.

Russia will sue France if Paris refuses to honor a contract on construction of two Mistral-class helicopter carriers for the Russian Navy, Kremlin chief of staff Sergei Ivanov said 23 October 2014. "We will file a lawsuit and demand compensation [if the contract is not fulfilled], as it's commonly done in a civilized world," Ivanov told reporters. "It's up to Paris to decide whether to honor the contract or not," he said. "We share long-running history of Russian-French relations, and we would not want to see these relations being sacrificed for the sake of fleeting [political] trends, Ivanov added.

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Page last modified: 29-09-2015 19:07:46 ZULU