France successfully demanded an exemption from EU sanctions for the deal out of concern for shipyards jobs and the potential damage to its reputation as a reliable defence contractor.
But President François Hollande has faced harsh criticism from the UK, Poland and the Baltic countries over the agreement between Paris and Moscow.
The decision to cancel the combat centre contract highlights Berlin's toughening stance towards Russia, which the EU and US accuse of supplying arms to separatists in the east of Ukraine.
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Germany's economics ministry suspended the 2011 contract between Rheinmetall, the country's largest weapons manufacturer, and Moscow in March following the annexation of Crimea. On Monday, the ministry said it was withdrawing authorisation altogether.
Sigmar Gabriel, Germany's deputy chancellor, said he was acting out of concern at the growing violence following the shooting down of the Malaysian flight MH17 over eastern Ukraine last month.
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Leading German politicians are pressing Paris to pull back from the Mistral deal. Karl Lamers, deputy chairman of the German parliament's defence committee, told the Financial Times on Monday: "This German decision is a kind of example for others, also for France. In 2010, when the contract was agreed, it was a quite different political situation. Now Russia has broken international law and gone against human rights law with the annexation of Crimea. This is not the time to be selling naval ships."
Asked if it were not too late to stop the Mistral deal, he said: "Better late than never." Mr Lamers suggested that the EU and Nato could help France make the "right decision" by offering to buy or lease the vessels.
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Meanwhile, the economics ministry confirmed that it was in talks with Rheinmetall about possible compensation from the German government. The ministry declined to give details. The company said it was in talks but gave no further information.
Rheinmetall has previously said that much of the work on the Russian training centre, which was to be located in Mulino in the central Volga region, had already been done and paid for. However, the economics ministry said that it was not yet functional, implying that some of the high-technology simulator equipment central to the contract had not yet been delivered.