Mistral Troubles: France Balancing Between Financial and Image Losses

The French weekly political and news magazine offers two possible scenarios: to deliver the warships or not to deliver. Both have major implications for François Hollande and the French defense industry.

To deliver Mistrals to Russia

France could opt for staying true to its word and transport the two warships, already built and tested, to Russia. After all, this is what Paris is supposed to do under the $1.3 billion agreement. Moscow has fulfilled its obligations under the deal and paid for the amphibious assault ships that await their fate in the docks of Saint-Nazaire, costing French taxpayers $5.5 million in maintenance per month.

Should Hollande decide to deliver the ships, French relations with NATO and Ukraine would cool down significantly, Le Point observed. This could lead to a sharp decrease in arms deals those dissatisfied with Moscow would want to ink with France.

The Mistral deliveries were put on hold in late 2014 over Moscow's alleged involvement in the Ukrainian civil war. The Kremlin has repeatedly said Russia is not a party to the deadly conflict and pushed for peace in the war-torn nation.

Not to deliver Mistrals to Russia

France could terminate the deal. It will then have to pay Russia $860 million already transferred to Paris and offer a compensation for the purchase of the equipment and crew training. The total amount France is expected to lose under this scenario will likely exceed $1.1 billion, the magazine pointed out.

Earlier in July, French Defense Minister Jean-Yves Le Drian acknowledged that the cancellation of the contract could cost Paris $1.3 billion.

The two countries are currently engaged in bilateral talks on the future of the deal. According to some sources, the two parties have reached a preliminarily agreement on the compensation for the non-delivery but no official announcement has been made.

Regardless of the exact amount, the relations between Moscow and Paris will be damaged. France will also have to say goodbye to its aspirations of becoming a reliable arms supplier if the Mistrals are not delivered.

To sell or not to sell?

The second scenario offers a dilemma of its own: France could sell the ships to a third party or use them. The former might look like a lucrative option, but Paris will have to obtain Russia's consent to do that. Moscow has stated this is a no go.

Moreover, the Sevastopol and the Vladivostok were built specifically for Russia. Refitting them for the new client would cost France hundreds of millions of dollars, Le Point observed.

Keeping the Mistrals would lead to less funding for the modernization of other ships operated by the French Navy, the media outlet stated. The general consensus is that Paris does not need additional Mistrals.