Russia and South Korea have been shortlisted for a $700 million contract to deliver two submarines to Indonesia,  passing France and Germany.

Russia's bid is the Project 636 diesel-electric submarine (export agent Rosoboronexport, picture above) while South Korea's is the U-209 sub manufactured by Daewoo Shipbuilding and Marine Engineering (picture below) under German license.

One of the principal conditions [of the contract] is, among other things, the transfer of technology, so that in the future, Indonesia will have the capacity to build its very own submarine.

The successful bidder is expected to be named by the end of August.

The Indonesian defense minister has said the submarines are to be delivered in 2011.

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