The French government has canceled a controversial deal under which it would have sold Russia two state-of-the-art warships for about $1.3 billion.

President François Hollande announced the decision not to go through with the sale after talks he held on Wednesday with his Russian counterpart, Vladimir Putin, the Guardian reported.

The two countries had reached "mutually acceptable agreement," both leaders noted in a joint statement, according to CNN Money. Russia will be reimbursed for funds it already paid under the contract, and France will retain ownership of the Mistral-class helicopter carriers.

Moscow said that it "considers the Mistral issue completely resolved," putting a definitive end to what would have been the biggest arms sale ever made by a NATO member to Russia, the BBC noted. Paris, for its part, added that all Russian equipment installed on the ships would be removed and handed back.

"France has already transferred these funds and, after the return of equipment, will acquire ownership and be able to take charge of both ships," the Kremlin detailed in a statement. Russia had already paid an advanced payment of over $900 million

Previously, Russia had threatened it might sue France for breaching the contract, according to the Guardian.

Mistral-class vessels can carry up to 16 helicopters, four landing craft, 60 armored vehicles, 13 battle tanks, and between 450 and 900 troops. They also come with a command and control, and medical centers.

Moscow had originally taken out an option on two more Mistral ships, but Paris had come under increasing pressure not to deliver even the first two ships because of Western sanctions imposed on Russia, following the anexation of Crimea and the subsequent Ukraine crisis. Technically, though, the deal could have gone forward as the contract preceded the implementation of the trade restrictions, CNN Money insisted.

Meanwhile, Russia continues to invest heavily to beef up its own military capabilities. Putin last year outlined plans to spend more than 3 trillion rubles to bring equipment up to date by 2025.