France won't cancel warship deal with Russia - sources

PARIS Mon May 12, 2014 5:15am EDT

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PARIS May 12 (Reuters) - France will press ahead with a 1.2 billion-euro ($1.66 billion) contract to sell helicopter carriers to Russia because cancelling the deal would do more damage to Paris than to Moscow, French diplomatic sources said on Monday.

France has come under pressure from Washington and some European partners to reconsider its supply of high-tech military hardware to Moscow. It had said it would review the deal in October - but not before.

However, French diplomatic sources said on Monday the 2011 contract with Russia for two Mistral helicopter carriers, with an option for two more, would not be part of a third round of sanctions against Moscow.

"The Mistrals are not part of the third level of sanctions. They will be delivered. The contract has been paid and there would be financial penalties for not delivering it.

"It would be France that is penalised. It's too easy to say France has to give up on the sale of the ships. We have done our part."

The Russian defence ministry warned France in March it would have to repay the cost of the contract and additional penalties if it cancelled the deal.

Russia's Mistral purchase would give it access to advanced technology, alarming some of France's NATO allies.

U.S. Assistant Secretary of State Victoria Nuland said on May 8 that she had qualms about the deal after several U.S. lawmakers demanded Washington put pressure on France to send a strong message to Russia.

The long-discussed French sale was Moscow's first major foreign arms purchase in the two decades since the fall of the Soviet Union. Former President Nicolas Sarkozy had hailed the signing of the Mistral contract as evidence the Cold War was over. It has created about 1,000 jobs in France.

A French government source said at no point had the U.S. officially expressed any concern over the sale, adding that the carriers would not be delivered with any weaponry.

"We are not delivering armed warships, but only the frame of the ship," the source said.

The first carrier, the Vladivostok, is due to be delivered by the last quarter of 2014. The second, named Sebastopol after the Crimean seaport, is supposed to be delivered by 2016. (Reporting By John Irish, Marine Pennetier and Elizabeth Pineau; Editing by Larry King)

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