UPDATE 3-Russian deputy PM doubts France's reliability as arms supplier
* France may suspend naval contracts in next sanction phase
* Suspending Mistral contract a tough political decision
* France backtracks on comments Russia suspended from G8
By Vladimir Soldatkin and John Irish
MOSCOW/PARIS, March 18 (Reuters) - Russian Deputy Prime Minister Dmitry Rogozin criticised France on Tuesday for saying it may cancel a 1.2 billion euro ($1.67 billion) helicopter-carrier contract with Moscow over the Ukraine crisis, and France seemed to back down on the issue.
French Foreign Minister Laurent Fabius raised the possibility on Monday of scrapping the deal depending on further sanctions against Moscow over its seizure of Ukraine's Crimea region, but later said he was only considering delaying it.
"France is starting to undermine confidence in it as a reliable provider in the very sensitive sector of military and technical cooperation," Rogozin, who oversees Russia's defence industry, said on Twitter.
French officials have shied away from discussing whether the 2011 contract for two Mistral helicopter carriers with an option for two more with Russia could be suspended, a potentially politically awkward sacrifice, to show French resolve.
Fabius had said that if Putin pressed ahead, France would "consider cancelling the sales", but on Tuesday he said, "What's being considered is the suspension of these contracts."
"On the one hand we understand that we can't deliver military hardware given (Russia's) behaviour, but on the other hand there is the reality of jobs and the economy," he told Europe 1 radio.
The long-discussed purchase was Moscow's first major foreign arms purchase in the two decades since the fall of the Soviet Union and the carriers can hold up to 16 helicopters, such as Russia's Ka-50/52s.
Russia's Mistral purchase would give it access to advanced technology, alarming some of France's NATO allies, especially in the aftermath of Russia's 2008 war with Georgia.
Former President Nicolas Sarkozy had hailed the signing of the Mistral contract as evidence the Cold War was over. The contract has created about 1,000 jobs in France.
The first carrier, the Vladivostok, is due to be delivered by the last quarter of 2014. The second one, named Sebastopol after Crimea's crucial seaport and illustrating its importance to Moscow, is supposed to be delivered by 2016.
Fabius insisted that no decision had been made and that it would only happen in a third round of European Union sanctions.
"It can only be envisaged in the framework of general sanctions. It cannot just simply be France," he said.
French officials privately looked to play down the possible suspension saying the idea was to avoid this at all costs.
"We are in the second phase (of sanctions) and we want to stay in that phase because our objective is a political solution," one government source said.
France's foreign ministry also backed down on comments made earlier by Fabius saying Russia had been suspended from the G8.
"We are suspending our work and our participation in the G8 as has already been announced," spokesman Romain Nadal told reporters, referring to the scheduled G8 Summit in Sochi in June. "That's what the minister meant."
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