Saint Petersburg: Russia will sign a 1.1 billion euro (USD 1.6 billion) deal on Friday to buy two French Mistral-class warships that has alarmed ex-Soviet neighbours and the United States, reports said.

The controversial contract, initially announced in January, will be signed by the two country's defence corporations on the sidelines of an investment forum in Saint Petersburg, a news agency said.

The report which quoted two Russian defence officials, made no mention of two other warships that were part of the initial framework agreement and which were supposed to have been built in Russia at a later date.

The report also failed to mention whether France had agreed to sell the sophisticated technology, the ships usually come equipped with and whose potential transfer to Russia has raised concern in the United States.

A business daily, however, said that France has agreed to transfer to Russia an advance naval operating system called SENIT-9, one of the systems at the centre of the dispute.

In exchange, Russia has offered for purchase by France several new Russian sea planes used in search and rescue operations, the business daily said.

If this report is confirmed, the Mistral sale would represent the first transfer of military technology between a NATO member and Russia, sparking concern in some of France's Atlantic Alliance partners as well as former Soviet states.