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OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHFR #1609/01 3351732
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O 011732Z DEC 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7663
INFO RHEHNSC/WHITE HOUSE NSC WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 001609 
 
SIPDIS 
 
E.O. 19528: DECL: 12/02/19 
TAGS: ECON EIND ETRD MASSPRELPARM RU GGFR
SUBJECT: FRANCE-RUSSIA MISTRAL CLASS SHIP SALE: VIEW FROM THE SHIPYARD 
 
Ref. Paris 01529 
 
Classified by Econ Minister Counselor Seth Winnick for reasons 1.4 
(B) and (D). 
 
¶1. (SBU) This message is based on reporting by American Presence Post 
Rennes. 
 
¶2. (C) Summary. Observers in the French shipbuilding industry 
(strictly protect) provided background information on prospects for 
the sale of Mistral-class helicopter carrier/amphibious assault ships 
to Russia.  They believe Russian navy officials have little 
confidence in their own shipyards and have turned to France for 
technology transfer for modernization.  Prime Minister Vladimir Putin 
announced in his recent visit to Paris that no decision has been made 
to buy the French assault ships but that it is under formal review 
along with other potential suppliers.  President Sarkozy has publicly 
committed to finding new clients for French shipyards to save jobs. 
The Mistral sale would help the STX shipyard and help President 
Sarkozy make good on his promise. End Summary. 
 
The French amphibious assault ship Mistral 
------------------------------------------ 
 
¶3. (SBU) Construction of the third Mistral-class helicopter 
carrier/amphibious assault vessel (known in French as "le Batiment de 
Projection et de Commandement - BPC") began recently at the STX 
shipyard in Saint Nazaire, near Nantes in Northwestern France.  While 
STX provides the "brawn" for the construction of this ship, French 
warship builder DCNS (Direction des Constructions Navales - Services) 
is providing the "brains," i.e. the design and research 
specifications as well as engineering and weaponry that went into the 
first two ships built in the program:  the Tonnerre (2005) and the 
Mistral (2006).  The Mistral-class is the second largest type in the 
French navy.  BPC3, the third ship in Mistral class, is expected to 
be completed in 2012. 
 
Selling to Russia, what is on the table? 
------------------------------- --------- 
 
¶4.  (C) Observers in the French shipbuilding industry believe that 
the Russian Government intends to acquire five ships in the Mistral 
class, with the first one to be built at STX in Saint Nazaire and the 
remainder in Russian shipyards.  The price would be 500 million euros 
for the first vessel.  Russia has asked for a manufacturing license 
for the four remaining ships which would be built in Russian yards. 
Industry sources speculate that DCNS and STX would together receive a 
100 million euro fee for the licensing agreement.  Most of APP 
Rennes' working-level contacts at DCNS and STX (in Nantes, Saint 
Nazaire and Lorient) have gone from skepticism last summer to 
near-certainty, now, that this deal will go through (though one DCNS 
engineer persists in believing that the whole deal will fall through 
at the last minute, having experienced long delays with a DCNS 
corvette program in Bulgaria). 
 
¶5.  (SBU) For the first vessel, STX plans to provide a completed hull 
including decks, living quarters and mechanical systems and 
propulsion.  However, APP Rennes' contacts think the electronics 
could conceivably be designed and installed by the Russians.  If 
there is any weaponry installed aboard the Russian ship while it is 
in France, DCNS would normally be responsible for its installation. 
During his November 27 visit to Paris, Russian Prime Minister 
Vladimir Putin confirmed the GOR has made a formal request to the GOF 
for a possible purchase of French Mistral ships but no decision has 
been made and other potential sellers of assault ships were being 
considered. 
 
Why buy French warships? 
----------------------- 
 
¶6.  (C) French shipbuilders said that Russian Navy officials have 
little confidence in the Russian shipbuilding industry.  They think 
that only a technology transfer can modernize their shipyards. 
Shipyard contacts were unable to give a timetable for construction 
but speculated that details could follow Prime Minister Putin's 
November 27 visit to France and the November 24 St. Petersburg port 
call by the Mistral. 
 
Implications for French Industry 
-------------------------------- 
 
¶7.  (C) STX is specialized in cruise ship building.  Although 
military shipbuilding is holding its own in the midst of the current 
economic downturn, orders for cruise ships have plummeted worldwide. 
STX has two cruise ships under construction and no other orders in 
sight.  The BPC currently under construction only requires 20 percent 
of the Saint Nazaire shipyard's production capacity.  The yard is 
therefore desperate for more orders and is pushing the GOF to sign 
the contract with the Russians, all the more so since French Defense 
Minister Herve Morin has already announced that the French navy would 
 
PARIS 00001609  002 OF 002 
 
 
not order a fourth ship in the Mistral-class program. 
 
¶8.  (C) Another major backer of the Russian contract is DCNS Director 
Patrick Boissier, who once headed STX.  Boissier's move to the post 
of DCNS director was a decision of the French Government, which owns 
75% of DCNS shares (the remaining 25% belongs to French defense 
contractor Thales which has an option to increase its stake by 10%). 
The French Government may intend that DCNS should one day take over 
STX.  The construction of the Mistral-class at STX has leveraged an 
industrial partnership between the two shipbuilders. 
 
¶9.  (C) Note:  French government took an equity share in STX when 
Norway shipbuilding Aker Yards sold out to the Korean STX company. 
It is worth noting that the French Government has used economic 
stimulus money to purchase the third BPC vessel.  The project will 
mainly benefit STX, since DCNS is only going to supply the combat 
system of the BPC3 project. 
 
¶10.  (C) Comment:  The Mistral sale would help the STX shipyard and 
help President Sarkozy make good on his promise last year to find new 
clients for the distressed shipbuilding sector and to save jobs.  The 
potential sale of French Mistral-class ships to Russia has raised 
concerns amongst Russia's neighbors in the Caucasus and Baltics 
(reftel).  Post defers to military analysts for an assessment on the 
potential improvements in Russian capabilities by adding the vessel 
type to the Russian fleet. 
 
RIVKIN