Sunday 9 August 2015

Russian Hawks Win in Failed Warship Deal

By Leonid Bershidsky

The saga of the two Mistral helicopter carriers France built for Russia, but refused to hand over because of the conflict in eastern Ukraine, is finally over. The net result is that a French shipyard has been saved at the French taxpayer's expense, while Russian taxpayers will pay to retool the country's wharves so the country can build more of its own warships.

The Kremlin said Wednesday night that Russian President Vladimir Putin and French President Francois Hollande have agreed to terminate the 2011 contract; that Russia has already received compensation for its expenses; and that it is preparing to dismantle Russian equipment installed on the ships. Russia, according to the statement, considers "the Mistral matter fully settled."

The Kremlin didn't say how much France paid to break its contract, the subject of months of back-and-forth, but the Russian newspaper Kommersant reported that "more than 1.1 billion euros" ($1.2 billion) has landed in the Russian government's account. This fits with French Defense Minister Jean-Yves Le Drian's statement that the compensation was less than the contract's initial 1.2 billion euro price tag.

Russia had so far paid 785 million euros for the warships, one of which was to be delivered last fall and the other later this year. Last September, Hollande suspended the deal under pressure from North Atlantic Treaty Organization allies, as Russia looked increasingly involved in the eastern Ukraine fighting. Russia initially talked of a multi-billion-dollar indemnity prescribed by the contract. In April, however, Putin said he wouldn't demand "any indemnities or over-the-top punitive damages." Instead, Russia asked France to compensate its outlay for new port infrastructure and the upkeep and training of the ships' crews.