France, Russia's Canceled Mistral Warships Deal Could Cost French Government Billions, Report Says

France’s cancellation of the sale of two Mistral-class helicopter carriers to Russia could ultimately cost the French government as much as 5 billion euros ($5.7 billion), according to a report released Thursday. French officials opted not to complete the deal late last year amid concerns over Russia’s military activity in Crimea and eastern Ukraine.

"Instead of bringing the French shipyards corporation DCNS the profit of €1.2 billion and its contractors some €890 million, the cancellation of the deal may cost France approximately €2-5 billion due to non-performance of the contract," French newspaper Le Point reports, according to Russian-owned outlet TASS. Under the terms of the Mistral deal’s contract, the Kremlin will gain the legal right to demand reimbursement from France when a grace period related to the deal’s completion expires on May 16.

Signed in 2011, the contract called for France to deliver the first of two Mistral carriers to Russia by the end of 2014, with delivery of a second ship scheduled for 2015. The French government has yet to repay Russia an initial installment of 890 million euros ($1 billion) toward the Mistral ships, and the two sides “have significant differences in regard to compensational payments” on the contract, according to Le Point. French taxpayers reportedly pay millions of euros per month toward the ship’s security and upkeep.

The French government backed out of the Mistral deal in late 2014 – despite the fact that construction on the Mistral was already complete – after the European Union implemented sanctions against Russia for its activity in Eastern Europe. Russia annexed the formerly Ukrainian territory of Crimea in March 2014 after a pro-democracy coup toppled Ukraine’s Moscow-friendly regime, and Western leaders have repeatedly accused the Kremlin of providing weapons and direct support to rebels in eastern Ukraine.

French officials have reportedly considered selling the Mistrals to other nations, including China, Brazil and India, as a means of recouping their financial loss on the canceled deal with Russia. France may also destroy the ships rather than sell them.