Termination of the Mistral Contract

17 August 2015

The French-Russian deal for the sale of two Mistral class amphibious assault ships was announced by President Sarkozy on December 24, 2010 and signed in his presence by Russian Deputy Prime Minister Igor Sechin and French Defense Minister Alain Juppé on January 25, 2011. This was the largest defense contract concluded between a NATO member and Russia.

The date chosen to announce the deal could not have been a coincidence. It was Christmas Eve and President Sarkozy must have thought that a 1.2 billion euro contract would be welcome news to the French public and contribute to his standing as a promoter of French economic interests.

The communiqué issued by the Elysée said that Presidents Sarkozy and Medvedev were pleased with this unprecedented cooperation which reflected the two countries’ readiness and ability to develop substantial partnerships in all fields including defense and security.

Mistral class ships, also known as helicopter carriers, have a crew of 160; can carry up to 16 medium or heavy helicopters, 4 landing crafts, up to 70 vehicles or 13 main battle tanks; can stock sufficient supplies for the crew and 450 troops for 45 days between replenishments; and, have a 69-bed hospital. They are equipped with advanced command and control systems and have a range of 11,000 nautical miles. As such, they are impressive tools of power projection. France has three in service.

Unfortunately for both sides, on November 21, 2013 President Yanukovych announced that the signing of the association agreement with the EU was suspended and this marked the beginning of the Ukraine conflict. As the West decided to impose sanctions on Russia the Mistral deal came under closer scrutiny and NATO countries began to voice their concern. France initially rejected the suggestion that the deal be scrapped or delivery indefinitely postponed arguing that restrictions should only apply to future contracts. Just a few days before EU meeting in Brussels in the wake of the downing of MH17 President Hollande still said that the delivery of the first ship named Vladivostok was to ahead in October 2014 as planned because the Russians had already paid for it, adding that the delivery of the second one named Sevastopol will depend on the attitude of Russians. At this time 400 Russian sailors had already arrived at the French port of Saint-Nazaire for training.

Gradually, however, the French mood started to change and Russians began to express their frustration. In May 2014 Russia’s Deputy Prime Minister Dmitry Rogozin said that money had been paid and had to be reimbursed together with fines and France risked not only losing money but also its reputation as a reliable supplier in military cooperation. He also referred to other technical problems that would arise since a third of the LHDs (landing helicopter dock) had been assembled in Russia and the sterns were built in a shipyard in St. Petersburg.

On September 5, 2014 the Minsk Protocol was signed to halt the fighting in eastern Ukraine. It failed. In November President Hollande stated that the current situation in eastern Ukraine still did not permit the delivery of Vladivostok to Russia.

On February 11, 2015 Presidents Putin, Poroshenko, Hollande and Chancellor Merkel issued a declaration in support of Minsk II cease-fire agreement. They reiterated their belief that there was no alternative to a peaceful solution. But cease-fire violations continued with both sides accusing each other of bad faith. At this time the 400 Russian sailors had completed their training at Saint-Nazaire and gone back home and the date of delivery of Vladivostok had already passed.

In view of lack of progress in Ukraine it was becoming increasingly evident that the first Mistral was not going to be delivered. This led to a change in the Russian attitude. On April 16, 2015 the Russian President held his annual “Direct Line with Vladimir Putin” conference, broadcast live by some Russian TV channels and radio stations. In response to a question regarding the Mistrals he stated the following:
“The refusal to deliver ships under the existing contract is, of course, a bad sign. However, frankly speaking, it’s of little consequence for us or our defense capability. We signed these contracts primarily to support our partners and offer work to their shipyard. We planned to use the ships in the Far East. For us, this is not critical. However, I believe that the leadership of France – and the French people in general – are honorable people and will return the money. We are not even going to demand any penalties or exorbitant fines, but we want all of our costs covered. This certainly means that the reliability of our partners – who, acting as part of the military-political bloc, in this case NATO, have lost some of their sovereignty – has suffered, and is now questionable. Of course, we will keep this in mind as we continue our military and technical cooperation.”
And in response to a follow-on question whether this was an easy way for France to get off the hook, the President responded “That’s all right, we’ll survive.”

Finally on August 5, 2015 Presidents Putin and Hollande had a telephone conversation and then issued statements which said that,
• The Mistral contract had been terminated,
• Payments made under the contract by the Russian side had been totally refunded,
• Russian equipment which had been installed will be returned,
• Once this equipment is returned France will have full ownership of the two warships, and
• The two Presidents were pleased with the openness and friendly partnership which characterized the negotiations.

The scrapping of the contract must have upset both Paris and Moscow. The former probably saw the deal as a major step to be followed by others giving France a larger share in the Russian market not only for the French defense industry but French exports in general. After all, Germany is an important economic partner of Russia also. Moscow, on the other hand, may have seen the purchase of the two Mistrals not only as an improvement of its naval capabilities but also a multi-dimensional political investment in its relations with the West.

What are the conclusions to be drawn from the Mistral episode?
Firstly, relations between the West and Russia still lack the confidence which should underlie such major undertakings in defense cooperation. NATO is an alliance of sovereign nations but such ventures can be the subject of consultations short of approval/disapproval.
Secondly, realism is always an asset. Both the French and the Russians have seen at some point that the project was doomed. Despite occasional exchanges of an accusatory nature they have wisely concluded that they had no interest in turning the issue into a major controversy. This would make an interesting case study for diplomatic damage control.
Thirdly, this episode has shown that conflicting interests, allegiances can be reconciled and that burning bridges is never a solution. This is something we need to be aware of in formulating Turkish foreign policy.

The Ukraine conflict goes on with a recent upsurge in cease-fire violations and mutual accusations as if to remind the world that it is there and cannot be eclipsed by the tragedies in Syria, Yemen, Libya and Iraq. The West continues to say that the annexation of Crimea by Russia is unlawful and will not be recognized. I find the naming of the second Mistral class warship rather interesting: Sevastopol. And, I wonder if there are other warships elsewhere named after cities of another country. As the long-term rental arrangements with Ukraine also reflected, Russia never intended to give up its traditional naval base in the Black Sea.

What is France now going to do with these two warships built according to Russian specifications? Some already point to a potential customer: Saudi Arabia. They have the money and wish to prove that they are a regional power to be reckoned with. Having two warships built for a world power may indeed appeal to them.

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