France Pays to Settle Mistral Dispute | Arms Control Association

Ending a 10-month-long impasse, French President François Hollande and Russian President Vladimir Putin agreed Aug. 5 to sever a 2011 contract in which France had committed to selling Russia two Mistral-class amphibious landing ships.

The contract is worth 1.2 billion euros (about $1.3 billion), according to French Defense Minister Jean-Yves Le Drian. It became controversial after Russia annexed Crimea in 2014 and began arming separatists fighting the Ukrainian government. On the eve of a meeting of NATO allies in September 2014, Hollande demanded that Russia agree to a ceasefire and a political settlement as a condition for scheduled delivery of the first ship in November 2014.

When no ceasefire materialized, France and Russia entered into negotiations early this year to dissolve the financial arrangement.

“The price in the [termination] agreement, which is the best possible, will be less as Russia will be repaid to the nearest euro the advance payments that have been made,” Le Drian told a radio reporter Aug. 6.

Reuters reported that France had offered a settlement of $866 million. Russia has asked for compensation of $1.28 billion, according to the Russian daily newspaper Kommersant.

A French official told Arms Control Today in an Aug. 18 e-mail that the exact amount of the settlement is not public information but will be shared this fall with the French Parliament, which has to ratify the settlement. The official said the French compensation “will be inferior to what Russia has spent” and therefore less than $1.3 billion.

Hollande’s statement on the cancellation agreement made no mention of Russian military intervention in Ukraine. The French president said he and Putin agreed that the negotiation took place in “a warm, open climate of partnership,” adding that he and Putin “agreed that the matter was now closed.”