The Indonesian Navy has selected Russia and South Korea as the final candidates to provide two submarines, under a $700m contract.
Indonesian Navy Chief Admiral Tedjo Edhy Purdijatno said that Russia and South Korea beat France and Germany in the bidding process at the final stage.
"One of the principal conditions [of the contract] is, among other things, the transfer of technology," said Purdijatno.
The formal proposal made by Russia is for the project 636 diesel-electric submarine from Russian export agent Rosoboronexport, reports RIA Novosti. South Korea, have offered up the U-209 sub manufactured by Daewoo Shipbuilding and Marine Engineering under German licence.
The winning bidder is expected to be announced by the end of August 2009 allowing the submarines to become operational by 2012.