For the first time French officials have admitted that pressure from other NATO states led to the cancellation of the arms deal with Russia.
France originally agreed the deal for the sale of two Mistral-class helicopter carriers in 2011, but later backed out after pressure from NATO members, according to RT. Tensions between the alliance and Russia have risen significantly after Moscow annexed the Ukrainian peninsula of Crimea and supported separatist rebels in the east of the country.
French Senate admits pressure from NATO members
A transcript of a debate in the French Senate’s International Affairs Committee was released this Tuesday. It reveals pressure from NATO members that could have impacted other arms deals.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge fund assets near $4 trillion, hedge funds slash their exposure to the big five tech companies, and Rokos Capital's worst-ever loss. Read More
“We experienced significant pressure from the East-European countries, not to mention the Baltic states, within the NATO Parliamentary Assembly,” said the Committee’s spokesman Robert del Picchia. “Poland had indeed threatened to break off negotiations [with France], which covered 50 Caracal helicopters worth $ 2.5 billion, if we delivered the ships,” he added.
Although the French government had previously claimed that taxpayers would not face any losses from the cancellation of the deal, it has since been revealed that the saga will see them foot a bill of $280 million. The costs arise because of the terms of a new deal for the sale of the ships, which will now be sold to Egypt.
Egypt buys ships, France cuts losses
“Excluding the sale (to Egypt), the French state will have to cover costs of around 1.1 billion euros ($1.24 billion),” the report said. “If the deal with Egypt goes through though, the cost may be reduced to 200 to 250 million euros ($225 – 281 million).”
It is thought that the ships will be sold to Egypt for $1.07 billion. The Elysee Palace announced that French President Francois Hollande had reached a deal with Egyptian counterpart Abdel Fattah el-Sisi following telephone talks.
The French Defense Ministry says that the ships will be sold for the same sum as the compensation paid to Moscow in compensation. Shipbuilder DCNS is expected to suffer losses as a result.
“Certainly, DCNS [company that built the Mistrals] will not draw the expected benefit,” said del Picchia. It is thought that some of the losses may arise from extra maintenance costs incurred as a result of the cancellation of the contract, which cost DCNS around $5.63 million per month according to the French media.
Russia to sell helicopters to Egypt for use on Mistrals
Further financial losses may also be incurred as France lost other contracts from Russia after it cancelled the deal for the Mistral ships. Sources believe that Egypt is set to buy 50 Ka-52 helicopters from Russia for use on the new ships.
A Russian defense source told the TASS news agency that “an agreement on the supplies of fifty Ka-52 helicopters has been signed. If the Egyptian side finds it necessary, the sea-based version of the helicopters will be supplied.”
It is thought that Egypt plans to use one vessel in the Mediterranean and the other in the Red Sea. Egypt is part of a coalition fighting Houthi rebels in Yemen, and its new Mistral ship could play a role in that conflict.
The French arms industry has created new partnerships with Gulf Arab states, some of whom are disappointed by the evolution of their relationship with the United States. Egypt alone has bought 7 military ships from France in the past two years.
Military buildup part of Arab strategy against Islamic State?
Egypt recently agreed to form a joint Arab military force in conjunction with Saudi Arabia, and it is thought that the Mistral deal will be financed with help from Gulf Arab states. France has also agreed to sell 24 Rafale warplanes to Egypt, the first export deal for the aircraft.
The modernization of Egypt’s military appears to stem from regional worries over the influence of Islamic State. The militant group has taken control of large parts of Syria and Iraq, while Egypt has also suffered terrorist attacks.
el-Sisi told the press that the military “has always been a factor for stability” in Egypt, and he continues to improve its capabilities. According to Defense News, other recent orders include a Fremm multipurpose frigate and four anti-submarine Gowind-class corvettes.
Analysts believe that procurement from France is a way of Egypt reducing its reliance on U.S. defense capabilities. “The reality is that Egypt isn’t going to try to conquer Libya or Yemen,” IHS Janes analyst Ben Moores told AP. “It’s not trying to change those countries. It’s just trying to keep a lid on them.”