Demystifying the consequences of cancelling the Mistral deal.

Version française

We can read quite surprising things about the consequences of cancelling the Mistral deal with Russia in the press. Let's set things straight.


1) Would France be seen as an unreliable partner and lose contracts?

The pro-Mistral deal often argue that, would France cancel the deal with Russia, it would appear as a not reliable partner and therefore lose potential contracts, including one of 128 Rafales for India. In April 2011, the Indian Air Force (IAF) shortlisted Dassault Rafale and Eurofighter Typhoon for the US$10.4 billion contract. Since that, no move has been done and France is still hoping to get the deal.

India is very much aware of the reasons why France might cancel the delivery of the Mistral to Russia as it has to face conflicts with China and Pakistan about its borders (Kashmir). This is certainly the reason why it is not taking sides about the Mistral deal.

On the other hand, delivering the Mistrals to Russia would have an almost certain consequence of having France being put aside on the polish market of arms with a consequence of at least 12.4 billion euros of markets lost. “I can’t hide the fact that the Mistral (warship contract) is not helping us make positive decisions” about French missile shield suppliers, Polish Defence Minister Tomasz Siemoniak said in an interview published in the Rzeczpospolita daily". Note that the Missile Shield market by itself represents 5.8 billion euros.

The consequences of delivering the war ships would also be that the France would be seen as an unreliable partner by all its allies, losing its reputation.

There has been at least three previous situations where France decided to cancel deals because of exceptional circumstances such as the one we have nowadays with Russian open invasion of Ukraine. It appears that France reputation was not broken by the cancellation of those deals and that it even helped negociations with other countries in some cases. History tells us that this argument cannot be taken into consideration.

  • In 1967, a French embargo was set up by the General De gaulle to prevent delivering arms to Israel following the six-days war. This embargo is decided even though France is building 50 "Mirage" planes and 12 vedettes (boats). As a consequence of this embargo and the decision not to deliver the planes to Israel to, France found new markets and was able to sell the Mirage to Syria, Egypt, etc. It also helped when France had to negociate with Saudi Arabia later.

  • In 1977, the delivery of two "Aviso" boats to South Africa was cancelled following an embargo voted by the United Nations. Argentina ended up buying the boats one year later and, satisfied with this purchase, decided to order a third one.

  • In march 2013, a boat built by STX which builds the Mistrals in St Nazaire was delivered to an Italian company. It had been originally ordered by Khadafi before the Lybian crisis that saw his fall in 2013.



History teaches us that France already broke contracts for similar reasons and is still considered as a reliable partner in the arms industry. In addition to that, 12.4 billion euros of military contracts with Poland might be lost if the Mistrals are delivered to Russia. There are no signs from India that it is willing either to go ahead and buy the 128 Rafale or on the contrary not buy them because of the Mistral not being delivered to Russia...

France should worry more about the consequences of NOT canceling the Mistral deal.

2) How many jobs would canceling the deal cost: 0, 300 or 1000?


First of all, nobody is asking for the second boat not to be finished so no jobs are at stake. The request from oponents to the Mistral deal is to find another buyer than Russia, which means that both boats have to be finished anyway.

The Front National (far right wing in France) is using the argument of jobs loss to scare people and try to get them on the side of the delivery. According to them, 800 to 1000 jobs would be lost. According to the unions representing the people working on the ships, it would be between 300 to 400 jobs. Besides, according to STX which is building the Mistrals: "the STX France shipyard in Saint-Nazaire has secured a stable amount of work lasting until 2018" so there are absolutely no risks of unenployment for the years to come, whatever happens to the Mistrals.

But as previously said, nobody is asking to stop the building of the second ships. So, the correct number is... 0 jobs.


3) How much France would have to pay back to Russia: 951 million or 12 billion euros?


Before Francois Hollande's decision to postpone the delivery of the first Mistral, the number of 251 million euros to pay as a fine in case of non delivery was the only one available. After that, numbers suddenly increased to crazy amounts up to 10 billion euros. Ask any expert in the arms industry and he will tell you that billions of euros fine for a 1.2 billion euro deal is simply impossible.

So, until proven wrong, we have tendencies to believe the 251 million euros that was cited for the first time on the 10th of August in the French newspaper Le Nouvel Observateur.

As for the amount Russia already paid to France on the contract of 1.2 billion euros, according to different sources, we know it is between 700 and 800 million euros.

As the French government is not communicating on details about the deal, we have no way to be sure but common sense leads us to think that France would have to
repay the 700 to 800 million euros Russia already paid + 251 million euros for breaking the contract. A total amount of 950 to 1.050 million euros...

Careful, nobody knows what the contract includes about the sterns built by Russian shipyards and this might add to the amount above. But as the possibility of cancelling the deal has been anticipated as in any other contracts, there are no doubts that the sterns issue is being mentionned in it too.


Dimitri Halby, No Mistrals for Putin

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Sources:

1) http://www.defensenews.com/article/20140929/DEFREG01/309290025/Poland-Sa...
http://www.dsi-presse.com/?p=6990#more-6990
http://lexpansion.lexpress.fr/actualite-economique/mistral-ces-autres-co...
http://nomistralsforputin.com/drupal/?q=MistralsPoland

2) http://www.franceculture.fr/emission-sur-la-route-sur-la-route-du-mistra...
http://www.stx.co.kr/FrontEN/PR/PR_00100_01.aspx?L=RU41&IDX=NjAx0

3) http://tempsreel.nouvelobs.com/l-enquete-de-l-obs/20140806.OBS5698/mistr...
http://euromaidanpress.com/2014/08/18/the-mistral-deal-behind-a-smoke-sc...
http://www.themoscowtimes.com/business/article/head-of-u-s-navy-calls-fo...
http://www.defenseindustrydaily.com/russia-to-order-french-mistral-lhds-...