France Defies US, British Demands To Kill Mistral Sale To Putin... For Now

Tyler Durden's picture

While the theater of Russian sanctions has been streamed to a live, and global, studio audience non-stop in recent weeks, when it comes to money actually walking, the French sale of its amphibious marine warship, the Mistral, to Russia has continued as planned (a $1 billion ship we should add). And it is this intransigence by Paris that piqued the ire of not only the UK but also the US.

First, it was British Prime Minister David Cameron who earlier today "questioned" France's plan to sell Mistral helicopter carriers to Russia, saying fulfilling such an order would be unthinkable in Britain after the downing of the Malaysian Airlines plane in Ukraine. When asked about France's plan to press ahead with a 1.2 billion-euro ($1.66 billion) contract to sell the ships to Russia, Cameron said: "Frankly in this country it would be unthinkable to fulfill an order like the one outstanding that the French have.

Well, France is not the UK which is why the US also had to chime in, and as Reuters reported moments ago:

  • UNITED STATES OPPOSES FRENCH SALE OF AMPHIBIOUS SHIPS TO RUSSIA -SENIOR ADMINISTRATION OFFICIAL

It is unclear if said official added that fulfilling such an order in the US would be unthinkable too.

Russia too had an opinion. As Interfax reported, "suspension of the Mistral contract would bring Russia much smaller damage than the damage France would suffer, should France backtrack on its obligation to deliver two helicopter carriers to the Russian Navy, said Deputy Prime Minister Dmitry Rogozin."

"Billions of euros stand behind these contracts. France has always been very pragmatic. I doubt that [Paris will backtrack on its obligations]," Rogozin told reporters in Samara on Monday.

 

"Suspension of the contract would bring 99% less damage to Russia than to France, as we have every right to claim the money and the deck components made by Russia's Baltzavod which France will have to disassemble," the deputy prime minister said.

 

"Russia has large-scale assembling know-how today. We can build such ships on our own, if required," he said.

So it was all up to France, which appears to have come up with a compromise of sorts, when moments ago it announced that while it is far "too late" to cancel the transaction of the first warship which will be delivered in October, regardless of how much farther European sanctions escalate, France would be willing to cancel the sale of the second Russian Mistral ship should sanctions be raised. Why? Because Russia still has not paid for said ship.

Of course, keep in mind that this is the same France which was already punished to the tune of $9 billion a few weeks ago when the US slapped a record fine on BNP, and which resulted in a statement by none other than the head of the French central bank (issued on the US independence day) that the BNP case would merely encourage "diversification" away from the dollar. 

 The reason for the fine? As Putin explained previously: to make blackmail France into selling any more ships to Russia.

Said otherwise, the US certainly does not enjoy being presented with counter-blackmail, and the second France warned that the USD may lose its reserve currency status, it was time to strike. What better way to do so than to show the world who is (still) boss than by depriving the French economy out of hundreds of million in much needed funds.

As for who the biggest loser is here, Russia was at least right about that. As the Telegraph reported moments ago: "the head of France’s business federation has called for an end to the 75pc tax rate and to the 35-hour working week, saying the country’s economy is “catastrophic”. Pierre Gattaz, president of the Medef – France’s equivalent of the CBI – said the 75pc tax that companies are forced to pay on employees’ annual salaries above €100,000 (£79,000) was damaging France’s competitiveness.

“It’s a symbol which, like the 35 hours, has gone around the planet, and it’s destructive. I never meet a single Chinese or American who doesn’t bring it up,” said Mr Gattaz. “The economic situation of the country is catastrophic … if France was a company, it would be going bankrupt.”

So sadly while France certainly has dire need for the funds, it will ultimately be forced to admit that, at least for now, the US is its superior, and once sanctions are once again raised, it will have no choice but to terminate the option for any more Russian ships... even if it means pushing its already "catastrophic" economy even deeper into the redline.

One wonders: with allies like these, is Paris certain it needs Russia as an enemy?