Russia Friday signed a long-awaited contract with France worth over a billion euros to buy two French Mistral-class warships that has alarmed ex-Soviet neighbours and the United States.

Russia's Rosoboronexport military corporation and DCNS, the warships' French maker, signed the contract on the sidelines of the Saint Petersburg Economic Forum, the biggest annual economic gathering in Russia, an AFP correspondent said.

France's Foreign Trade Minister Pierre Lellouche, speaking to reporters, estimated the contract at 1.12 billion euros ($1.6 billion).

Rosoboronexport director Anatoly Isaikin added that France had agreed to transfer sensitive technologies, a key demand of Russia in the deal and one of its most controversial aspects.

"They agreed to transfer all the technologies which have been promised from the very beginning," he told reporters without elaborating.

Russia has been keen to receive an advance naval operating system called SENIT-9 from France as part of the package.

Isaikin said the first two ships would be built in France. "The third and the fourth (ships) will be built in Russia but when I can't say so far. It's a lengthy process," he added.

The purchase -- the first by Russia of major military hardware from a NATO member -- has sparked concern in some of France's Atlantic Alliance partners as well as former Soviet states.

A Mistral-class ship can carry up to 16 helicopters, four landing craft, 13 battle tanks, around 100 other vehicles and a 450-strong force. It has facilities for a full command staff and is equipped with a 69-bed hospital.

Earlier in the day Russia's state shipbuilding holding United Shipbuilding Corporation and South Korean company STX Offshore and Shipbuilding signed a preliminary agreement to build a new shipyard in Saint Petersburg.

Under the deal estimated at some $720 million, the two companies will establish a joint venture in which the South Korean company will have a blocking stake, said United Shipbuilding Corporation spokesman Alexei Kravchenko.

If Russia agrees the purchase of another two ships from France, they would likely be built at the new shipyard, Kravchenko said, adding that the existing Admiralty Shipyards in Saint Petersburg will be involved in the construction of the first two Mistrals.

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