Perils and Proposals: Military Contracting with Volatile Regimes

Mistral DockBy Andreas Kuersten

The Fletcher Forum of World Affairs

France has a Russia problem—one that is vexing its policymakers. By contracting to deliver Mistral-class helicopter carriers to Russia amidst Russian aggression towards Ukraine, France has assumed the untenable position of selling military hardware to a country whose military actions it decries. France’s current solution of suspending the contract, although effective in avoiding domestic political consequences of cancellation, is only temporary. Inevitably, France will be forced to either arm a hostile state with warships or harm its defense industry and pay Russia damages for breach of contract—a challenging predicament. Thus, France’s Mistral dilemma should serve as a cautionary tale for Western arms suppliers trading with unpredictable actors and encourage modification of similar contracts in the future. Such modifications would be straightforward, protect against revenue and domestic employment losses, and help advance foreign policy that aligns with Western values.

The status of the Mistral contract has steadily evolved since its 2011 formation. In response to Russia’s actions against Ukraine, the West levied sanctions that France initially asserted were inapplicable to the carriers. However, when Allied pressure caused France to temporarily suspend the deal, Russia responded by setting a deadline for delivery and threatening legal proceedings. France was unfazed and eventually suspended delivery indefinitely.

However, indefinite suspension is not cancellation—nor has France genuinely threatened the latter. Cancellation would compel repayment of the roughly $1.6 billion contract and create liability for punitive damages for contract breach. It would also result in the loss of hundreds of French jobs in the defense industry, an area of robust growth in a largely stagnating economy. Overall, cancelling the carrier contract would cause substantial harm to this sector and, thereby, political support for French leadership.

Yet these domestic repercussions must be weighed against international responsibilities. France, a leading voice against Russian aggression, has also long maintained constant advocacy for human rights and the rule of law. Additionally, France’s allies have been outspoken in their opposition to the contract.

In a skillful but precarious balancing act, France has worked in the interests of all parties without fully appeasing any. Suspension of the carrier contract prevents military materials from heading for Russia, thus placating both international allies and France’s own security interests. Meanwhile, with the contract technically intact, Russia has delayed legal action and the French economy remains unharmed.

However, no suspension is infinite—inevitably, Russia will demand something for its money. France must then choose between delivering warships to an expansionist power or paying a hefty price for its values.

Continue to full article . . .

Picture: Yannick Le Bris, http://commons.wikimedia.org/wiki/File:FS_Mistral_04.jpg#filelinks

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