AFP STR | A container ship crosses the new waterway of the Suez canal on July 25, 2015

President François Hollande's office announced Wednesday that a deal had been reached with President Vladimir Putin to pay Russia compensation for cancelling the delivery of two French Mistral warships over the Ukraine crisis.

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Russia will be "fully reimbursed" for the two warships, the Elysée Palace said in a statement.

The Kremlin said compensation had already been received and that it now considered the matter "resolved".

“France has already transferred these funds and, after the return of equipment, will acquire ownership and be able to take charge of both ships,” the Kremlin said in a statement.

“Moscow considers the Mistral issue completely resolved.”

The amount of compensation to be paid had been a sticking point, with Paris only proposing to reimburse the €785 million in cash paid in advance by Russia, but Moscow claiming that an additional €1.2 billion was needed to cover the costs of training crews and building port infrastructure in Vladivostok that it had incurred.

The French presidency statement said that Russia would "exclusively" be reimbursed the "sums advanced as part of the contract".

French Defence Minister Jean-Yves Le Drian said Thursday that the total cost of reimbursing Russia would be less than 1.2 billion euros, telling RTL Radio there was “no further dispute on the matter”. He did not specify the precise sum.

The fate of the two Mistral helicopter carriers has weighed heavily on France-Russia ties for more than a year, following Paris's decision to delay the €1.2 billion ($1.3 billion) deal as the West slapped sanctions on Moscow over its annexation of Crimea and the Kremlin's alleged backing for separatist rebels in Ukraine.

Hollande said earlier this year that the conditions for the delivery were "still not right" and suggested that only a full implementation of a tenuous ceasefire in eastern Ukraine could make Paris reconsider.

Putin in April downplayed the importance of the ships but insisted that the French side reimburse Moscow for "all expenses" if the contract were to be cancelled.

France's training last summer of Russian sailors aboard the first Mistral ship in the French port city of Saint-Nazaire angered its Western partners, who said the delivery of the ships would undermine their joint efforts to isolate Russia and condemn its annexation of Ukrainian territory.

Russia and the West are locked in their worst stand-off since the Cold War over the Ukraine crisis, with the EU and US introducing increasingly damaging sanctions on Moscow.

US President Barack Obama urged Paris in June to "press the pause button" on the warship deal with Russia.

France agreed in 2011 to build and sell the two advanced helicopter assault ships to Russia with the first one scheduled for delivery in October or November of last year and the second in 2015.

France’s naval industry considers the Mistral one of its engineering jewels, with the navy dubbing the ship the “Swiss army knife”.

It is designed to carry as many as a dozen assault helicopters, 60 armoured vehicles and a dozen tanks. It can also host up to 700 troops and has a full hospital on board.

(FRANCE 24 with AFP)

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