Mistral Warships Sale Canceled, But Russian Defense Contractor Still Makes A Profit

The defense arm of the Russian government has turned a profit from the cancellation of the ill-fated deal with France for two Mistral class helicopter ships. In addition to being fully reimbursed for the $1.35 billion contract, which was canceled because France objected to Russian involvement in Ukraine, the government received around $1 billion in compensation for the expense of building new naval infrastructure, ordering specialized helicopters and installing advanced equipment on the ships, according to a report Monday from the Russian news site Sputnik.

Moscow made a profit from the reimbursement on the two ships because of a fluctuation in the value of the ruble against the euro.

“France has fully refunded the costs of construction of the Mistral-type helicopter carriers. The euro then was worth some money, now it costs almost twice as much," said the company's director general Anatoly Isaykin, speaking on the Rossiya-24 television channel, according to Sputnik. "In ruble terms, our [Russian] companies got some more [than they spent]."

The deal for both ships, signed in 2011 by Rosoboronexport and the French DCNS naval defense company, was due to be completed this year. However, Russia’s annexation of Crimea in March 2014 and its continued involvement in the east Ukraine war forced Europe to apply strict economic sanctions against Russia and President Vladimir Putin’s powerful circle of oligarchs.

Even though the ships were never part of those sanctions, the E.U. pressured French President Francois Hollande into halting the deal. Hollande said the ships would not be delivered until Russia ensured the terms of the Minsk peace agreement were met and that Moscow could guarantee political transition for the war torn region of Donbass. Neither of the terms were met and the deal was canceled this past summer.

France has since managed to sell the ships to Egypt, while Russia also was able to get Cairo to take the helicopters it built for use on both ships.