France Recognizes New Reality And Old Obligations

A NATO summit convening today in the United Kingdom may have been the incentive France needed to finally suspend delivery of a nearly operational warship to Russia, NATO’s newly revived chief adversary.

After a national security meeting at the Elysee Palace, French President Francois Hollande’s office released a statement saying that the “conditions for France to allow the delivery of the first BPC are not there.” The decision is a postponement of the Mistral-class warships’ sale, not a cancellation, at least for the time being. Still, it is an about-face for the French, who had up until now resisted pressure from their NATO allies to scrap the deal in light of Russia’s blatant aggression in Ukraine and its implied threat to Poland and the Baltic states. France had signaled it planned to go ahead with the deal as recently as Monday.

The president’s statement also said that “Russia’s recent actions run against the foundations of security in Europe.”

There was no other reasonable option for the French other than to suspend the deal. They would have been supplying offensive capability to a country that is a direct threat to NATO allies had they gone ahead with the 2011 agreement to provide two Mistrals to Vladimir Putin’s navy.

Though Russia denies that it is sending troops and equipment to support Ukrainian separatists, this has not stopped Putin from demanding a ceasefire from Kiev and outlining a plan to entrench rebels’ regional gains. Until yesterday, the French position was that European Union sanctions against Moscow could not apply retroactively and that canceling the contract would have been too costly. The truth, however, was that France is a part of NATO, and if it wishes to remain one, it must honor the guarantee of mutual defense the treaty includes.

France might ultimately be forced to cancel the deal outright, but the suspension is a step in the right direction. It will certainly make for a less awkward summit in Wales, especially since Ukrainian President Petro Poroshenko will attend.

While the decision not to sell Russia the Mistrals will check Russia’s amphibious capability, it will do little, if anything, to actually help Ukraine. What the Ukrainians desperately need is weapons and gear in order to defend themselves against a Russian invasion. All they have gotten up to this point is sanctions and talk.

In Estonia yesterday, President Obama sought to reassure the Baltic states by declaring that the U.S. would honor its NATO obligations for mutual defense. He also declared that Washington would stand with non-NATO Ukraine, in the latest instance of pro-Ukrainian rhetoric untethered from clear action. NATO’s plans to base troops in eastern European nations is a start, but again, will do little to help Ukraine. And even the sanctions themselves have served as a point of contention among NATO countries, as economic concerns jostle against the ability to recognize the military threat an unchecked Russia could pose to alliance members.

Hollande’s decision recognizes that France must sacrifice even a powerful economic interest due to the changing security situation. Still, the Mistral deal’s suspension is really just a more powerful version of sanctions. It may serve to moderate Russian behavior, but it won’t get any troops currently in Ukraine to go home. And while it will doubtless annoy Moscow, suspending the sale will not prevent Russia from moving forward with the course it has selected for itself.

But at least France is acting like an ally of the Baltic countries, rather than an arms merchant to Putin. It took longer than it should have, and it is not enough on its own, but France’s decision is finally a step back in the right direction.

About Larry M. Elkin 552 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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