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19 October 2017
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France offers EUR 785 mln in compensation for breach of Mistral contract, Russia insists on more

France has submitted proposals to Russia regarding the termination of a contract to build two Mistral helicopter carriers for the Russian navy, Russian newspaper Kommersant has reported, citing sources familiar with the matter.

REUTERS
REUTERS

The newspaper said France will offer Russia EUR 785 million in compensation, on the condition that Moscow allows the sale of the vessels to any third party, without any reservations.

In addition, France has offered to share the risks and costs associated with dismantling from the vessels the Russian equipment supplied during their construction.

Currently, these proposals are being discussed in the Defense Ministry and other departments involved in the contract, according to the source.

It was also reported that Russia’s Defense Ministry is not satisfied with the compensation offered. According to its estimates, "losses and expenses" incurred in connection with the construction and maintenance of Mistral total EUR 1.163 billion.

In particular, Russia expects to get back, in addition to its advance payment of EUR 892.2 million, reimbursement of funds spent on training helicopter crews, the construction of infrastructure for their home base in Vladivostok, and work on developing Ka-52K deck-pad helicopters. Furthermore, Moscow believes that dismantling should be carried out by the French side.

Shipbuilding company DCNS, which is building the Mistrals, has said the contract is now invalid due to force majeure. Meanwhile Russia intends to use the right to repurchase, as stipulated by French law, under which Paris will be required to sell the ships. At the same time, Russia will have the right to set any final price without any explanation thereof. 

Deputy Prime Minister Dmytro Rogozin has already informed the Secretary General of the Defence and National Security of France Louis Gauthier, who is authorized to negotiate with Russia, that Moscow is not satisfied with the French proposal, adding that the Russian side is working on a counteroffer, according to Kommersant.

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