It is now official, France will be the first NATO country to sell Russia Mistral-class amphibious assault ships. This announcement came on March 1 after a meeting lasting just one hour between French President Nicolas Sarkozy and his Russian counterpart Dmitry Medvedev at the Elysée Palace near the Champs-Elysées in Paris.
The Russian tradition of treating economic transactions between two countries as primarily instruments of influence and the means to achieve political goals and only secondarily means of economic development and modernisation was upheld in Paris last week. In accepting the French offer (details of which will be negotiated in the coming weeks) Russia shunned better commercial deals from Spain, Netherlands and South Korea, countries also building Mistral-Type command ships for half the price the French have put on the table. Despite the Spanish Buque de Proyeccion Estrategica (BPE)’s competitive edge over the Mistral (it is bigger than the French vessel) and the fact that it won an international competition when the Australian Navy bought two of them instead of French Mistrals, Russia gave in to France’s political weight and privileged political, strategic and non-economic considerations with its decision.
The main issue is why France, in spite of mounting criticism from some of its North Atlantic allies, the Baltic States, Poland and Georgia, is cosying up to unlawful Russia (breach of the August 12, 2008 ceasefire agreement). We can distinguish four general causes of France’s readiness to sell Mistral vessels to Russia, all of them having more to do with the French domestic situation than grand foreign policy schemes.
Many analysts have suggested that economic necessity drives Medvedev’s establishment of partnership with Sarkozy. They have it partly wrong. The opposite is also true: economic necessity is at the heart of France’s pursuit of deeper relations with Russia.
The French industrial sector is considered by many a shipwreck. It is seriously threatened with death. Manufacturing production and investment in that sector suffered a 13% plunge in 2009, while 196,000 jobs disappeared, representing 42% of job losses. France’s share of exports in the eurozone has dropped from 16 to 12.5% since 2000. Warning signs of decay are multiplying in the French economy and infrastructures: numerous breakdowns in the rail transport system, significant drop in the production of nuclear energy due to inadequate and ageing equipment, frequent power grid failures in the western and southern part of the country.
At the international level, trade and industrial setbacks have accumulated in the last ten years: Siemens’ pullout from a joint venture with Areva, the world's biggest nuclear reactor builder, forcing the French company to buy back shares in its nuke reactor for some 2 billion Euros (about US $3 billion), Areva’s reactor construction disaster in Finland, where the French state-owned nuclear power group had to pay billions of euros in penalties for delays and overruns and, adding to its woes, the galling loss of a contract to supply four reactors to Abu Dhabi (South Korea got the contract), which could be interpreted as a failure for President Sarkozy as he had travelled to the United Arab Emirates (UAE) to promote Areva’s bid, the failure to get contracts for the construction of 42 high-speed rail lines in China and Saudi Arabia (the Medina-Mecca project) and Poland’s decision in 2004 to give China the contract to build a 49 kilometre highway. Problems in the French industrial sector are so serious that the highly respected French weekly magazine Le Point published an article in its February 4 issue entitled “Why We [France] Lose Mega Projects.”
The French economy cannot do without its industrial sector as it is essential for France’s economic growth. Contrary to the British economy, the French economy cannot thrive strictly on the service, finance or construction sectors. The industrial sector is the driving force behind employment growth and job reallocation fluctuation. For each new job in industry, between 6 and 10 more jobs are created in the service sector. Also, an economy without factories is an economy without R & D (Research and Development) dynamism, export and productivity gains. Also, industrial development and growth is the surest vector of integration into the global economy. In France, the industrial sector has lost almost two million jobs in the last three decades and the current world crisis is only accelerating this trend which started in the early 1980s. President Sarkozy has made it a priority to turn round this trend, which Jacques Attali and Nicolas Baverez, two prominent French economists and intellectuals, have dubbed “le déclinisme.” On March 4, the French President announced that the French Government would take steps to support the French industrial and manufacturing sectors. The Mistral deal with Russia is reflective of this new emphasis on helping French industrialists.
The second cause of the impending Mistral carrier sale to Russia is France’s relative economic decline (“déclinisme”) compared with Germany and the continual rise in the economic cooperation between Germany and Russia. France estimates it can find a niche in the arms trade with Russia since Germany is not really active on that market with its eastern neighbour.
France and Germany have entered into a divergent phase in economic and industrial development. Since the collapse of the Soviet Union and the reunification of the two Germanys in 1990, German industrialists have been able to raise Germany’s competitiveness and strengthen the high-tech sector, so that, compared to France, Germany is now well-positioned to take advantage of the coming growth upswing in emerging markets (47% of German exports go to emergent markets, while they absorb only 25% of total French exports). Bonn’s timely employment policy has helped contain unemployment (7.7% against 9.8% in France). Germany has also managed to eliminate its budget’s structural deficit (6.2% in France) and to control public spending as a ratio to GDP (45% of GDP, despite almost US $2 billion invested in the reunification, against 56% of GDP in France).
The German-Russian strategic partnership is also worrying Paris. In 2008 German-Russian foreign trade volume grew by 19.8% to more than 68 billion Euros. That year Russia became, for the first time, the top German trading partner in Eastern Europe, ahead of Poland. German exports to Russia reached a volume of 32.3 billion Euros, almost equal to its export volume to China (34 billion Euros), a much more populous country than Russia (population of 142 million). Russian statistics show that more than 6,000 German companies are registered in Russia, and that they had invested US $17.4 billion by the end of 2008. However, the investment volume is significantly higher in reality since many German enterprises conduct their investment transactions in third countries, such as Austria or the Netherlands. Because of the world economic downturn, economic activity between Germany and Russia slightly decreased in 2009. L’Elysée is mindful that the long-term sustained growth of German-Russian trade stands in sharp contrast to the development of France-Germany or Germany-US business relations.
The third reason for the Mistral transaction is Sarkozy’s low popularity among French voters only two years before the next French Presidential election. Refusing to sign a contract with Russia worth hundreds of millions of euros and securing the jobs of thousands of French workers, in a grim world economic context, on the phony pretext that Russia constitutes a military threat, eminent or not, to French, European or NATO interests would surely prompt French workers to organize demonstrations and picketing throughout the country and for many days. Moreover, Sarkozy and the French Government are facing the last test before the 2012 Presidential election with regional elections to be held on March 14 and 21. In fact, Sarkozy and the Union pour un Mouvement Populaire (UMP) candidates (“la droite”) are sure to lose these elections. The main issue is what will be the magnitude of the defeat of the right. Sarkozy is currently so out of favour that he has taken a back seat in these regional elections and let Prime Minister Francois Fillon, more popular, run the electoral campaign for the right.
Finally, the growing Franco-Russian cooperation is a result of the lingering anti-Americanism in French politics and society. Anti-Americanism in France is associated with Gaullism (the UMP is a member of this political family) and “sovereignism” (primacy of national sovereignty). General de Gaulle’s foreign policy has left a lasting impression on France’s political forces, on the right as well as on the left. Almost all political parties baulk at losing control of France’s sovereignty and destiny. The result is a succession of foreign policy actions intended on quelling the excessive power of the US in world affairs. French foreign policy toward Russia, and the Mistral sale is an obvious example, is guided by a persistent desire to give France the capacity to impact on global issues and retain a role as a major international actor. France will turn a deaf ear to US (and Georgian) sabre-rattling on the Mistral affair.
Richard Rousseau, Ph.D. is associate professor in international relations at the University of Georgia and columnist for the newspaper The Georgian Times (www.geotimes.ge)