Blaming Russian behaviour and actions in Ukraine, France on Wednesday decided to stop the delivery of the first of two Mistral heavy transport ships to Russia, President Francois Hollande's office announced Wednesday.
The move is certain to spark bitter controversy with Moscow.
Russia has ordered two Mistral navy transport ships and has already paid USD 1.6 billion for the order. Around 400 Russian sailors are already in France for training and sea trials with the first vessel.
Paris has long maintained that the contract must be honoured and was not linked to the situation in Ukraine. However, it has come under pressure from Ukraine, European allies and the United States to halt the delivery of the first vessel, which was due in October.
President Vladimir Putin has warned of serious consequences and financial penalties if France does not respect the contract.
Nevertheless, in a "Restricted Defence Council" meeting Wednesday, Hollande and his senior ministers debated the Ukraine situation and the President decided he could not deliver the ships in current conditions.
The situation in Ukraine is "grave," Hollande's office said, noting that "the actions carried out by Russia recently in East Ukraine contravene the foundations of security in Europe." Hollande said in the meeting that "despite the prospects of a cease-fire, which remains to be confirmed and implemented, the conditions in which France can authorise the delivery of the first (Mistral) -- have not been met at this time."