PARIS — France faced a €55 million (US $62 million) bill to compensate Moscow paying for work to adapt Russian equipment that was shipped over and fitted on the two Mistral helicopter carriers recently bought back by the French government, a defense official said.

Egypt is "well in the lead" among countries interested in buying the Mistrals now that France is looking to resell the warships, the official said. If the export client asks and if Moscow agrees, the Russian equipment could stay onboard, the official said.

That €55 million amount brings to €948 million the cost of canceling the deal, as the former comes on top of the €893 million of advance payment that Paris repaid.

The cancelled contract cost less than €1 billion, government spokesman Stéphane Le Foll said Aug. 26 after the Cabinet discussed the draft bill on the cancellation, Agence France-Presse reported. The bill now goes to parliament for approval.

A parliamentary vote is expected Sept. 16 or 17, the official said. Russia paid for "studies, development and work" on equipment that was sent to France and installed on the warships, the Vladivostok and Sevastopol, at Saint-Nazaire, western France.

Sistemy Upravleniya designed and built the telecommunications and missile control systems, Tass news agency reported Aug. 25. A first team of Russian specialists has left for France to agree to a timetable for dismantling the equipment, and a second team is due in early October.

That equipment will now be stripped off the ships and returned to Russia, as part of the political deal reached Aug. 5 between Presidents Hollande and Putin. The cost of cancellation also includes the training by DCI of 400 Russian sailors.

DCNS, in which Thales holds 35 percent, was prime contractor. DCNS will be covered by Coface, an export credit agency that offers insurance on foreign deals. The coverage, however, will not include the profit margin for the state-owned naval systems company.

The secretary general for national defense and security, which reports to the prime minister's office, negotiated the settlement with Moscow. The two sides reached a broad agreement in May and concluded the details at the end of June to early August.

France agreed to the sale of the two ships, worth €1.2 billion, with options for two more, in 2011. The deepening crisis in Ukraine and pressure from Western and East European allies led to Paris canceling the deal.
Brazil, Canada and India are among countries reported to be interested in the Mistral. Egypt has bought the Rafale fighter jet, a sophisticated Fremm frigate multimission and four Gowind corvettes, with two more under option.

Email: ptran@defensenews.com

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