French President Francois Hollande has reached an agreement with Russian President Vladimir Putin on compensation for two French Mistral warships that were to be delivered to Russia, according to a statement from the Elysee Palace on Wednesday.

It has taken months for Hollande to make his final decision.

The Mistral-class helicopter carriers Sevastopol and Vladivostok were built at the STX Les Chantiers de l'Atlantique shipyard site in Saint-Nazaire on the west coast of France. They were due to be sold to Moscow for $1.2 billion ($1.3 billion euros) in a deal signed by former President Nicolas Sarkozy in 2010.

All Russian equipment installed on the ships is to be removed and handed back to Russia, according to the Elysee statement.

Delivery of the first warship to Russia was due in October or November but France is now to keep both, according to the French president's office.

Sanction pressure

The deal for the ships was put on hold after Russia annexed Crimea in March 2014 and became involved in the conflict in eastern Ukraine.

Hollande came under pressure within the EU and from the US to suspend the contract after Russia's non-compliance with the second Minsk ceasefire agreement for Ukraine in February. Sanctions imposed against Russia did not extend to the Mistral warship contract.

Russian sailors had started sea trials on the warships in preparation for a handover. The ships have specialist Russian communications equipment on board and Russian propulsion machinery.

"The president of Russia and the president of France took a joint decision to annul the contract," the Kremlin said in a statement on Wednesday. "Moscow considers the Mistral issue to be completely settled."

Russia is expected to build its own helicopter landing ships. France has to decide what to do with the two Mistrals.

jm/rc (AFP, Reuters)