Defense Industry Boss Slams 'Absurd' French Ship Deal

A senior Russian defense industry official described as “absurd” on Thursday a previously-agreed deal to purchase two French-built Mistral assault ships for the Russian Navy.

Military-Industrial Commission Deputy Head Ivan Kharchenko said the $1.2-billion deal with a French shipyard, signed under the ousted Defense Minister Anatoly Serdyukov has caused significant damage to the state and the Russian shipbuilding industry.

“We have been discussing the absurdity of this earlier decision. It was the initiative of Serdyukov and it’s not the only damage he has inflicted to the government and the industry,” Kharchenko said a meeting with defense companies in Moscow on Thursday.

Russia and France signed the contract for two French-built Mistral class ships in June 2011. The first ship, the Vladivostok, is being built at the DCNS shipyard in Saint-Nazaire and is due to be delivered in 2014, while the second, the Sevastopol, is scheduled for delivery in 2015.

Kharchenko said the ships must now be completed, otherwise Russia “would lose more” if backtracks the deal. Another contract for two other Mistral vessels was under discussion, but has been postponed.

Defense equipment deals normally include massive penalty clauses for cancellation to protect the producer from losses by clients pulling out, as they incur huge expense when starting such projects.

Serdyukov was fired from his office amid an investigation into alleged fraud at Defense Ministry subsidiary firms. Kharchenko's comments come a day after Ground Forces commander Vladimir Chirkin said the Russian Defense Ministry would not purchase any more Italian-made light multirole vehicles (LMV).

Senior figures in the Russian defense establishment have been critical of the poor performance of much of the domestic military-industrial complex in recent years, and have often threatened to buy abroad if need be.
Russia's then-President Dmitry Medvedev said in June 2011 that the Defense Ministry could buy foreign military equipment if domestically-produced gear was overpriced.

"You must purchase only high quality hardware at transparent prices, not for the prices appealing to some companies," Medvedev said at a meeting with Deputy Prime Minister Sergei Ivanov and then-Defense Minister Serdyukov.