PARIS — France paid Moscow a total €949.7 million (US $1.1 billion) for canceling the controversial sale of two Mistrals, including €56.7 million for the Russian supply of equipment and training sailors for the helicopter carriers, according to a parliamentary bill said.
The government has sent the draft bill to parliament and it was published yesterday on Sept. 2, Defense Ministry spokesman Pierre Bayle told journalists.
"The present agreement provides for, in the first paragraph, the French government to pay the Russian government the agreed sum of €949,754,849," statessaid the draft bill, signed by Prime Minister Manuel Valls and Foreign Minister Laurent Fabius.
A swift payment requested by Russia puts pressures on France to find the finances, which will puts pressure on strain the 2015 defense budget.
The €950 million total amount includes €56.7 million to repay Russia's funding the modification of combat systems for the warships, the Vladivostok and Sevastopol, and training 400 sailors, the bill states.
Sistemy Upravleniya designed and built the telecommunications and missile control systems, Tass news agency reported Aug. 25. A first team of Russian specialists has left for France to agree a timetable for dismantling the equipment, and a second team is due in early October.
The core amount is a refund of €893 million in Russian advance payments to prime contractor DCNS.
Negotiations between the general secretary for national defense and security, Louis Gautier, and Russian Deputy Prime Minister Dmitry Rogozin allowed their respective heads toof state to cancel Aug. 5 the 2011 deal on Aug. 5.
There is concern France might divert funds from the defense budget to finance the deal with Russia.
"But which budget will fund the payment?" Member of Parliament François Cornut-Gentille said on his website. "The Finance Ministry? Defense? Foreign Affairs? Prime Minister? Interministerial solidarity?"
The Russians will want a swift payment so there is a risk that spending on equipment in the 2015 defense budget might be redirected to fund the repayment to Russia.
Prime contractor DCNS and French suppliers are covered by export credit agency Coface, so there will be no financial or labor impact, the draft bill said. DCNS has completed construction of the Mistrals, which were due for delivery in November 2014 and 2015.
The insurance allows DCNS to cover costs incurred for the full contract worth €1.2 billion but that will mean the company makes no profit on the deal, a political source said.
Egypt is "well in the lead" among countries interested buying the Mistrals now that France is looking to re-sell the warships, a defense official said. Modifications for sailing in the Arctic poses no problem to a sale to Egypt.
"A ship built for cold waters can also sail in warm waters," a Navy spokesman told journalists.
France will solely repay Russia solely for the cost of building the warships, so Paris will not pay for a naval adaptation of the Kamov Ka-52K combat helicopter or modification of the naval base at Vladivostok in the Crimea, according to the bill said.
France can resell the ships on conditions that the repayment has been made, the equipment onboard has been stripped out and returned to Russia, and that Paris has informed Moscow, the draft bill said states. Russia’s sole condition was to be paid as soon as possible.
The bill has been sent to the lower house National Assembly's foreign affairs committee for examination on Sept. 15, followed by debate in the full house on Sept. 17, Agence France-Presse reported.
France agreed in 2011 to the sale of sell Russia the two ships , worth €1.2 billion, with options for two more, in 2011. The deepening crisis in Ukraine and pressure from Western and Eastern European allies led to Paris canceling the deal.
Brazil, Canada and India are among the countries reported to be interested in buying the Mistral. Egypt has bought the French Rafale fighter jet, a sophisticated Fremm multimission frigate and four Gowind corvettes, with two more under option.
Email: ptran@defensenews.com
