Cairo has sought to boost its military power in the face of a two-year insurgency based across the Suez Canal in the Sinai peninsula and fears the conflict in neighbouring Libya could spill over. Egypt’s allies are also keen to burnish its image in a region beset by turmoil.

“We unwound the contract we had with Russia, on good terms, respectful of Russia and not suffering any penalty for France,” Hollande told reporters on his arrival at an EU summit in Brussels.

“Yesterday, I agreed the price and conditions of this sale with (Egyptian) President (Abdel Fattah al-) Sisi and so France will ensure the delivery of these ships without losing anything, while helping protect Egypt.”

A French defence ministry source said the contract was worth about 950 million euros, but unlike the deal with Moscow would not include any technology transfer.

As of yet there had been no talks on the potential armament for the carrier, which can hold up to 16 helicopters and 1,000 troops.

“The ships should be handed over in early March after the training of about 400 Egyptians and some final tests,” the source said.

A diplomatic source said Cairo wanted to base one ship in the Mediterranean and another in the Red Sea, making it available for future operations in Yemen, where Egypt is part of a Saudi-led coalition fighting Houthi rebels.

The French government agreed to reimburse 950 million euros to Moscow last month after the Mistral sale to Russia was canceled as a result of the Ukraine crisis.

The deal with Egypt comes as France has nurtured new links with Sunni Arab states, which appreciate its tough stance on their Shi’ite rival Iran and similar positions on the region’s conflicts.

France has also benefited from what some Gulf countries perceive as disengagement from a traditional ally, the United States.

One source close to the matter told Reuters in August any deal with Egypt would likely be part-financed by Gulf Arab states.

Egypt and Saudi Arabia agreed at the end of July to work together to create a joint Arab military force.

The Mistral is known as the “Swiss army knife” of the French navy for its versatility. The sale will take the number of French naval vessels sold to Egypt to seven in just two years.

Egypt last year bought four small Gowind warships, built by Mistral manufacturer DCNS, which is 64 percent owned by the French state and 35 percent by defence group Thales.

It also acquired a French frigate as part of a 5.2 billion euro contract for 24 Rafale warplanes earlier this year, France’s first overseas export of the fighter jet. ($1 = 0.8953 euros)

(By Jean-Baptiste Vey and John Irish, Additional reporting by James Regan; Editing by Tom Heneghan)