Russia Plans To Build Own Warships After Conceding That Mistral Deal Is Dead

Russia plans to build its own warships after conceding that the $1.3 billion deal for two Mistral-class helicopter landing ships with France is dead, a senior Russian military official said Tuesday. The only negotiation to be completed with Paris, he said, is over compensation for breaking the contract.

"Russia will not take them, it is a matter of fact, and there is only one discussion currently underway and it concerns the sum of the compensation which Russia should be reimbursed with," Oleg Bochkaryov, deputy chairman of the Military Industrial Commission, told journalists at a Moscow press conference.

The Sevastopol and the Vladivostok, which are both fully built and have undergone sea trials, have been at the center of controversy since French President François Hollande halted their delivery in September 2014 because of what the West says is Russia’s military action in Ukraine.

While France was under no legal obligation to stop the sale of the two ships, European Union sanctions added political pressure on Hollande. Initially postponing their handover, Hollande said that if Russia observed a ceasefire in Ukraine, first signed in September 2014 then again in February 2015, and complied with a pact with Kiev, the ships would be handed over.

But since the signing of the Minsk II ceasefire, which supposedly went into force on Feb. 15, few days have passed without violence in the contested Donbas region of Ukraine, where pro-Russian rebels are getting direct Russian help, a claim that Moscow denies.

In light of the continuing conflict, Hollande announced in April that he would consider refunding Russia for the ships.

French negotiator Louis Gautier is due to arrive in Russia this week to discuss the compensation. "Gautier is coming to Russia today or tomorrow, and we’ll conduct another round of difficult negotiations," Bochkaryov said, according to Russian news agency Tass.

Independent Russian newspaper Kommersant reported earlier this month that France would return the $875 million Russia had already paid, but only after Russia granted permission to sell the ships to any third party without conditions. Moscow, however, says it has undergone "expenditures and losses in connection with the broken contract at 1.163 billion euros ($1.26 billion) and does not intend to issue any permits for re-export until the money is returned," noted the report.

"The option with the return of the sum mentioned in the French proposal does not suit us at all, and Deputy Prime Minister Dmitry Rogozin already informed Gautier, authorized to hold talks on their part, of that. They are now preparing their arguments," a source told Tass Tuesday.

France has been looking for a new buyer for the ships in order to ease the final bill for the French taxpayer. Although there are no credible candidates yet, some have indicated that Canada or China may be willing buyers.