As the guns go silent in Ukraine, France may now see fit to complete a major military contract with a still boisterous and unrepentant Russia.
For almost four months now, France has denied Russia military hardware that the latter has already paid for. Of the two Mistral-class helicopter carriers that Russia ordered from France in 2011, and for which it paid a majority of the total $1.6 billion cost upfront, the Vladivostok was supposed to be handed over in November 2014. Yet the outbreak of violence in eastern Ukraine and subsequent standoff between Russia and the West led to the indefinite suspension of the deal. Now, the two warships sit at the port of Saint Nazaire in western France still lacking a clear delivery date — the Sevastopol remains under construction and was originally scheduled for delivery in Fall 2015, but its delivery is included in the suspension.
However, the recent ceasefire deal reached by Germany, France, Russia and Ukraine may finally bring an end to the Mistral impasse. When France instituted its indefinite suspension of the carrier contract, President Francois Hollande put in place two conditions under which it could once again proceed: first, an observed ceasefire in Ukraine; and second, a roadmap for the settlement of the dispute. The deal brokered in Belarus potentially supplies both of these requirements.
The ceasefire in eastern Ukraine, despite breaches, largely continues to hold. But it is unclear exactly how long the guns must remain silent before France considers the ceasefire to have been “observed” for the purposes of the Mistral contract. The ceasefire deal also includes a roadmap for the resolution of the conflict; although a mere roadmap is nowhere near actual resolution and there is much doubt over whether the peace will hold. Still, France only demands a roadmap for the resumption of the Mistral contract, not the complete resolution of all issues.
Following the ceasefire deal, the Russian news service Interfax reported a Russian “military diplomatic source” stating that France might now deliver the Vladivostokin early March. Despite the unclear veracity of the report, France, with its two conditions for delivery arguably met, might now consider itself able to save enough face to deliver the vessels.
It was only a matter of time and circumstance until France reinstituted the Mistral contract. This is because the potential domestic political and economic consequences of complete cancellation substantially outweigh any domestic and international political and security repercussions.
The French defense industry is a lonely bright spot in an otherwise morose national economy, and the $1.6 billion Mistral contract is a substantial piece of this. Were the contract cancelled, France would have to repay the entire amount that Russia paid upfront plus a large penalty for breach of contract — the BBC reports that the contract contains a roughly $285 million cancellation fee. This is money that France cannot pay back easily.
Cancellation of the contract would also result in a massive loss of French defense industry jobs, and influential unions represent these workers. The combination of potential union opposition to political leaders and damaging economic effects are powerful incentives to leave the deal intact.
Finally, some have commented that cancellation would severely damage France’s reputation as a military goods exporter. This concern, however, has only been voiced by Russians and the Russian media. Despite the Mistral controversy, the French defense sector has actually increased its exports this past year and recently signed an important contract with Egypt for fighter jets and a frigate.
Russian persistence in asserting this possible consequence is likely self-serving in two ways. First, Russia simply wants France to follow through on the Mistral deal. Second, Russia is angling to replace France in a major military contract to supply India with jet fighters and will use any tool to decrease France’s standing in India’s eyes. With these issues in mind, reputational concerns are likely moot.
By comparison, the possible negative consequences for France of contract completion are minimal. While most commentators have focused on the transfer of the Mistrals themselves as the biggest concern, this is incorrect. It is, however, true that they are formidable and versatile warships that are far more advanced than anything Russia’s neighbors are able to field, with substantial abilities in terms of command and control and amphibious assault. But the most important aspects of the contract are actually its technology and capability exchanges.
The Mistral deal includes the Russian procurement of advanced combat information control and communications systems for the carriers. This technology is much more advanced than what Russia currently possesses and can be used on other Russian vessels. In addition, Russian engineers are working alongside their French counterparts on the design and construction of the ships, and the contract contains the option for Russia to build two more Mistrals in domestic ports. This is important because it is widely noted that Russia does not currently have the ability to construct vessels larger than frigates, though it aspires to produce cruisers and even aircraft carriers in the hopes of fielding a true blue water navy. When the Mistral contract was signed, Admiral Vladimir Vysotsky, then-chief of the Russian navy, said: “The purchase of Mistral shipbuilding technology will help Russia to grasp large-capacity shipbuilding.” Completion of the Mistral contract, therefore, entails the meaningful enhancement of Russian military capabilities beyond the mere addition of two to four helicopter carriers.
In its current dire economic situation, however, Russia is unlikely to undertake the option of building two additional carriers in its homeports, much less construct large warships in the near future. Western sanctions in response to Russia’s actions in Ukraine, combined with historically low oil prices, have dramatically impacted the Russian economy. The World Bank predicts that the Russian economy will decline by approximately 3% in 2015, while the ruble has decreased in value by 44% over the past year. This dampens any impact of military technology and capability transfers in the near-term, and thereby reduces French domestic and international security concerns over the resumption of the Mistral contract.
The final major consequence of completing the carrier deal is likely a hit to France’s reputation. Since Russia’s aggression against Ukraine commenced, France’s allies have applied broad pressure to cancel the contract. The United States, Britain, the Baltic states, Germany and Poland, among others, have all voiced strong concern over the handing over of military hardware to a clearly belligerent and expansionist power. Furthermore, France has consistently been a champion of human rights and the rule of law on the international stage. Supplying defense capabilities to a regime whose military actions France decries is a clear act of hypocrisy. Though completion of the contract at a time when the conflict stands still ostensibly reduces its duplicity, a high level of moral opacity still colors the exchange.
Reputational consequences, however, can easily be short-lived. In the age of the 24/7 news cycle, and noting the near constant new foreign policy issues that must be addressed, a reputation can be damaged and mended rather quickly. In addition, the completion of one military contract with a bad actor that was signed during a period when most of the West was engaged in a “reset” with Russia is unlikely to have a significant impact.
For France, the consequences of cancelling the Mistral contract have always outweighed those for completing it, by a fairly wide margin. During the time when there was active major combat in eastern Ukraine, France skillfully appeased all interested parties by suspending the deal. Suspension stopped the Vladivostok from heading to Russia and thus placated allies and security concerns. It also kept the contract technically intact and thereby dissuaded Russia from commencing legal action and prevented domestic political and economic consequences. While many have proposed alternatives to selling the ships to Russia, it has continued to make sense for France to complete the contract at the earliest opportunity.
The current ceasefire in eastern Ukraine could be that opportunity. There is, of course, the well-founded worry that the ceasefire will fail, and in that case France will most likely continue suspending delivery until another opportunity presents itself. But if it holds, we can expect one French-built and Russian-paid-for helicopter carrier to finally begin making its way to Russia, with another to follow later this year.
*[The views expressed in this article are solely attributable to the author and do not represent those of the National Oceanic and Atmospheric Administration or the US government.]
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.
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