August 6, 2015 4:43 pm
For sale: two French warships with a negotiable price

Michael Stothard in Paris


For sale: two Mistral-class helicopter carriers worth €1.2bn. Good condition. Price negotiable.

France has extricated itself from one of its trickier diplomatic binds after it finally agreed to break a contract with Russia over the sale of two 21,000 tonne warships. Now it is facing a new dilemma: what to do with them?

The two vessels, which can each hold 600 troops and 16 attack helicopters but cost millions of euros a month to keep at port, had been sold to Russia, which even sent sailors to western France to train on them.

But tensions over the Ukraine crisis prompted France to halt delivery late last year under pressure from EU allies and Washington.

On Wednesday evening the two countries finally cancelled the contract, meaning the cash-strapped French government will have to take ownership of the ships and reimburse all of the money paid.

Jean-Yves Le Drian, the French defence minister, on Thursday said there was no cause for worry. There were “a number of countries” that had expressed an interest in buying the ships, he said.

But according to analysts, that may not be so simple. The government needs a buyer who will want two foreign-built warships at short notice and at a price not too far below the Russian one.

The problem is that of the 13 countries in the world that have stated a need for this grade of ship over the next decade, only India and Turkey want delivery in the next few years, according to an analysis by IHS Jane’s.

And in both countries there is a political lobby demanding that the ships be built locally, not imported. India, the world’s biggest importer of military ships, for example, this year said that all military ships would now be assembled locally.

Ben Moores, senior defence analyst at IHS Jane’s, said that the main challenge for France was not finding interested parties – as there are always countries willing to talk or negotiate – but price.

There is “not a chance”, he argued, that France would recoup the €1.2bn that Russia paid. “The problem they are going to face is they are going to have to reduce the price significantly,” he said.

Given its own budget pressures, France may come under pressure to sell relatively fast, since the cost of keeping each ship runs into the millions of euros each month. The French state had considered just sinking the vessels, according to newspaper reports last year.

The French government, which undertook the sale in 2011 under former president Nicolas Sarkozy when relations with Moscow were warmer, is already facing a minor political backlash over the cost of cancelling the contract.

Thierry Mariani, a deputy in parliament for the centre-right Republicans party, criticised the government’s decision, adding that the cost to the taxpayer could run as high as €1.6bn.

This takes into account the €1.2bn returned to Russia and what Mr Mariani says is €200 to €300m for what he called the “derussification” of the ship, meaning the removal of customised equipment that had been installed on board.

The removal job is set to be carried out by a Russian team in September, according to a Russian news agency. The French government said that it would inform parliament in due course about the exact cost.

Marine Le Pen, the head of the far-right National Front party, on Thursday said that the cancellation “seriously discredited France” in international business dealing and that “the taxpayer bleeds” as a result of the decision.

The Mistral-class ships, which are for the moment called Sevastopol and Vladivostok, may be a bitter pill to swallow. But the French government has otherwise been on a roll selling defence equipment this year.

It has signed €10bn worth of contracts with Egypt and Qatar for its Rafale fighter jet along with a €4bn agreement with India. Before that the 27-year-old jet had not won a single export order.

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