France will not cancel a €1.2bn contract to sell Mistral helicopter carriers to Russia despite pressure to increase sanctions over the Ukraine crisis.
French diplomatic sources said cancelling the deal would do more damage to Paris than to Moscow, illustrating the limitations of European Union sanctions urged by the USA to punish Russia for its annexation of Crimea and dissuade Moscow from intervening in east Ukraine.
The long-discussed sale was Moscow's first major foreign arms purchase in the two decades since the fall of the Soviet Union and former President Nicolas Sarkozy had hailed the signing of the contract, which created about 1,000 jobs in France, as evidence the Cold War was over.
France had said it would review the deal in October, but French diplomatic sources said today the 2011 contract with Russia for two carriers, with an option for two more, would not be part of a third round of sanctions against Moscow.
"The Mistrals are not part of the third level of sanctions. They will be delivered. The contract has been paid and there would be financial penalties for not delivering it,” said one of the sources. "It would be France that is penalised. It's too easy to say France has to give up on the sale of the ships. We have done our part."
The Russian defence ministry warned Paris in March it would have to repay the cost of the contract and additional penalties if it cancelled the deal.
About 400 Russian sailors are due to come to France in June to receive training for the Mistral, which can hold up to 16 helicopters four landing barges, up to 70 vehicles and 450 soldiers. The first carrier, the Vladivostok, is due to be delivered by the last quarter of 2014 and the second, named Sebastopol after the Crimean seaport, is supposed to be delivered by 2016.
The deal will give Russia access to advanced technology, which alarmed some of France's NATO allies at the time, especially in the aftermath of Russia's 2008 war with Georgia.
"We have regularly and consistently expressed our concerns about this sale, even before we had the latest Russian actions, and we will continue to do so,” US Assistant Secretary of State Victoria Nuland told the House Foreign Affairs Committee.
Lithuanian Foreign Minister Linas Linkevicius said last week he believed the European Union should include an arms embargo in any new round of sanctions on Russia.
Officials have suggested Paris could look to sell the ships to a different buyer or without the technology, and one official also said there were provisions under World Trade Organisation rules that enable countries to break contracts under such circumstances.
A French government source said at no point had the US officially expressed any concern over the sale, adding that the carriers would not be delivered with any weaponry. "We are not delivering armed warships, but only the frame of the ship," the source said.