Hollande, Putin reach agreement on cancelled warship deal

France said Wednesday it had agreed a compensation deal with Russia for failing to deliver two Mistral warships due to the Ukraine crisis, drawing to a close a months-long diplomatic and commercial spat.

The fate of the ships has long plagued Franco-Russian ties following Paris' decision in November to put the 1.2-billion-euro ($1.3-billion) deal on ice as the West slapped sanctions on Moscow over its annexation of Crimea and backing of rebels in Ukraine.

The French presidency said in a statement that Russia would be "fully reimbursed" for the two helicopter carriers, which France will keep.

It added that all Russian equipment already installed on the ships will be removed and handed back to Moscow.

Russia, meanwhile, said France had already returned the money and considered the matter closed.

"The president of Russia and the president of France took a joint decision to annul the contract," the Kremlin said in a statement after a phone conversation between the two leaders.

"France has already transferred the funds and after the return of the equipment will assume full right of ownership and can use the ships as it sees fit," it added.

A Russian military source on Tuesday told state-run news agency TASS that a group of Russian specialists will be sent to France in September to dismantle and return communication equipment onboard the ship.

- How much compensation? -

Neither statement mentioned the issue of any compensation payable to Russia.

Paris had proposed to pay back 785 million euros in cash already paid out by Russia, but Moscow wanted around 1.2 billion euros in compensation on top of that, arguing that training costs for the crews and building port infrastructure in Vladivostok should be reimbursed.

It appeared that Paris got its way, as the French presidency statement said Russia would "exclusively" be reimbursed "sums advanced as part of the contract."

The first Mistral had been due for delivery in 2014, while the second was to be delivered this year.

But as Russia and the West remained locked in their worst standoff since the Cold War over the Ukraine crisis, France's Western partners said any delivery of ships would undermine their efforts to isolate Moscow over its 2014 annexation of Crimea and support of separatists in eastern Ukraine.

In June last year, US President Barack Obama had urged Paris to "press the pause button" on its deal with Russia, signed in 2011.

The EU and US have slapped damaging sanctions on Moscow, and while there have been repeated attempts to negotiate an end to clashes between Kiev and the pro-Russian rebels in the east, none have held out.

The 16-month war in the European Union's backyard has killed nearly 7,000 people and Kiev and its Western allies fear it may turn into a "frozen conflict" in which low-level violence becomes a constant menace that leaves much of eastern European on alert.

Earlier this year, Hollande said that the conditions for delivery of the ships were "still not right".

And in April, in a sign that the deal was on rocky ground, Putin had downplayed the importance of the ships but insisted that the French side reimburse Moscow "all expenses" if the contract were to be terminated.
Source: AFP