Future of the Mistral Contract
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Jacques Sapir

Director of studies at École des Hautes Études en Sciences Sociales (EHESS) in Paris, and head of the Centre d’Étude des Modes d’Industrialisation (CEMI-EHESS).

Valdai Discussion Club

France currently faces a dilemma in connection with a contract for the sale of four Mistral-class amphibious assault ships. Two of them are to be built in France, and two more in Russia. A number of foreign leaders, including those in the three Baltic countries, Poland, the United Kingdom and the US, have demanded that France either annul or freeze the contract in the context of the Ukraine crisis. This dispute, which began in March 2014, flared up again after the recent Malaysia Airlines plane crash. The situation sheds some light on France’s contradictory foreign policy and what motives determine it.

Important contract

It goes without saying that France considers this contract to be very important. First are the social implications. The 1.2 billion euro contract is providing employment to workers at the Saint Nazaire shipyard through 2015. This contract is basically unprecedented, at least since 1937 when the USSR purchased the Tashkent, a destroyer, from Italy. Since that time Russia made no defense orders with foreign countries. This important agreement allows France to strengthen its position in the shipbuilding market. France has primarily built frigates, guided missile speedboats and submarines until now. And even in Russia the Mistral contract has caused a mixed response.

France has insisted that the contract will be fulfilled. The contract was signed in 2011 after lengthy talks. In 2008, when Russia and Georgia clashed over South Ossetia, the proposed Mistral contract also became the subject of heated debate. In spite of this, then French President Nicolas Sarkozy decided to sign the agreement. As always, the transaction was motivated by various factors. First, the contract had tremendous significance for the French defense industry and shipbuilding sector. Cancelling it this point would incur substantial social and financial losses. Furthermore, the contract would allow France to enter a new sector in the market. Cancelling the contract would undermine France’s long-term credibility in other countries that might be interested in buying this or any other technology or equipment. So this issue also concerns France’s long-term reputation as an arms exporter.

The ambiguous stance of Francois Hollande

The stance of French President Francois Hollande appears ambiguous. On the one hand, he repeats the US administration’s statements that resistance fighters from southeastern Ukraine are responsible for the downing of the Malaysia Airlines plane, although many sources, including former US intelligence officers, question these allegations. On the other hand, President Hollande has so far ignored the demands to freeze the contract. He appears to be weighing the possible losses and gains in each hand. Actually, France’s losses from cancelling the contract would outweigh its gains from voicing a “tough” stance on an issue that looks more dubious with each passing day. Besides, there may be another cause for France’s position. Although it opposes Russia on the Ukraine crisis, it continues to resolve other crises, including the Mali crisis, in cooperation with Moscow. It is common knowledge that the French army owes its successful and long-term military operations in Mali to Russian transport companies. In early August, An-124 cargo aircraft delivered military equipment to Bamako. So the cancellation of the Mistral contract would negatively impact French-Russian cooperation against Al Qaeda fighters in Islamic Maghreb in North Africa. Many logistics support elements of France’s Operation Sangaris in Mali and other military initiatives depend on its cooperation with Russian companies.      

Will Hollande bow to pressure?

Will the French Government be able to maintain this stance until the contract is fulfilled? This is the question today. France will soon be subjected to even greater pressure. Such countries as the United States and the United Kingdom that are motivated by political and commercial interests would only benefit if France loses its reputation as an arms supplier to developing countries. It is common knowledge that Washington and London want to oust Paris from the global arms market. If France surrenders its position, it would fail to maintain its military sector, and a country without a defense industry finds itself at the mercy of other countries, primarily those retaining their defense industries.

The French Government and President Hollande have taken a tough stance until now. This jeopardizes the existence of the so-called “European defense system” which has failed completely during the current Iraqi crisis. It would be interesting to watch President Hollande’s response when he realizes that his well-justified policy regarding the Mistral contract facilitates the disintegration of the European Union. President Hollande advocates so-called “European federalism,” and his EU partners may criticize him for this. Nevertheless, the French leader should understand that the EU’s political efforts have failed miserably in Syria, Mali and now Iraq. It is very important that President Hollande not sacrifice France’s national security and resources for the sake of the European Union, which is declining more rapidly with every passing day.

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