Cairo has sought to boost its military power in the face of a two-year-old insurgency based across the Suez Canal in the Sinai Peninsula and fears the crisis in neighboring Libya could spill over. Egypt's allies are also keen to burnish its image in a region beset by turmoil.
“There are indeed discussions that are relatively advanced to take the two Mistrals,” one French source close to the matter said. “It's Egypt.”
The source said if there were a deal it would likely be financed in part by money from Gulf States, which consider Egyptian President Abdel Fattah Al-Sisi a bulwark against the now-outlawed Muslim Brotherhood movement.
Egypt and Saudi Arabia, which are part of a coalition fighting Houthi rebels in Yemen, agreed at the end of July to work together to create a joint Arab military force, including defining their maritime borders along the Red Sea.
A second French source confirmed the talks, but said the financing was unclear.
DCNS and the French Defense Ministry declined to comment.
France, whose navy already operates three Mistral helicopter carrier warships, has no use for the two ships and will have to pay Russia less than 1 billion euros ($1.14 billion) for cancelling the contract, the French government spokesman said on Wednesday.
The Mistral is known as the Swiss army knife of the French navy for its versatility. It can hold up to 16 helicopters and 1,000 troops.
Last week, President Francois Hollande said there were a number of potential buyers for the carriers. Sources told Reuters earlier this month other countries interested included Brazil, Singapore, Malaysia and Canada.
“France has chosen to consider Egypt as a major player in the Middle East. Its stability is essential, and Egypt expects a lot from France,” Hollande added.
Last year, Egypt bought four small Gowind warships, built by Mistral manufacturer DCNS, which is 64% owned by the French state and 35% by defense group Thales. It also acquired a Fremm frigate as part of a 5.2 billion euro contract for 24 Rafale warplanes earlier this year.