There was no surprise in the Israel Navy over the weekend report that German Chancellor Gerhard Schroeder's outgoing government has agreed to sell Israel two submarines for a deeply discounted price. German news magazines Der Spiegel and Focus reported on Saturday that the submarines would be built in Kiel for a total of about â‚¬1 billion (NIS 5.4 billion) and the federal government would pick up one-third of the cost. The navy has been seeking two more of the state-of-the-art diesel/electric subs to add to its fleet of three Dolphin-class subs which Germany practically donated after the 1990 Gulf War. But the German government has repeatedly turned down the request, reportedly because of reports Israel had outfitted the submarines with Israeli-made, sea-launched cruise missiles. Sensitive armaments deliveries need approval from Berlin's secretive security council. According to German media reports, Schroeder's Social Democrat-Greens government had long been hesitant about the deal, which would help its indigenous shipbuilding industry, because it feared that Dolphins armed with nuclear weapons would threaten Middle East stability. For the past two years, reports have appeared periodically of an impending Dolphin sale, but this report came following warming defense ties between Israel and Germany. Israel and Germany recently agreed for the first time to hold joint ground forces maneuvers this coming year, most probably on German soil. This came about following a visit to Israel earlier this month by Gen. Wolfgang Schneiderhan, chief of staff of the German Armed Forces. The air force and the navy have both conducted joint exercises over the years, and there has been an exchange of military delegations and observers. But this would be the first joint ground exercise, reportedly focused on urban counter-terrorism, sniper squad and special operations missions. The two new Dolphin submarines would reportedly be built at the Kiel-based Howaldtswerke-Deutsche Werft AG, the world's biggest builder of non-nuclear submarines. The Dolphin-class submarines are the most expensive platforms in the IDF's arsenal. Germany donated the first two submarines to Israel as a gift after the first Gulf War and split the cost of the third. Navy sources said the newer Dolphins will be able to stay submerged for a longer period than the present ones. The major obstacle has been the cost of the submarines. A senior Navy source said that there was much debate in the IDF over the necessity of more surface vessels; there was no question that Israel needed more submarines. The source added that Israel was looking to recreate Germany's 1990 generosity. "The disengagement is having an impact on the Germans and we don't expect a problem with their permits," the source told The Jerusalem Post. Other senior naval officers have said they expect ties to improve due to the changing political environment both here and there. "There is a life span to these submarines," a senior Navy officer said, adding that the first Dolphin-class submarine is already seven years old. The Navy plans to upgrade its Dolphins so that they can remain under water for a longer length of time. The Dolphin was built according to Israeli specifications gleaned from Israel's experience. Its short and stout shape was tailor-made for Israel's special needs and it reportedly has considerable commando capability. It has a crew of 35 and can support 10 additional passengers. It has a maximum speed of 20 knots, has a range of 4,500 kilometers and, according to Jane's Defense Weekly, it has the capability to launch cruise missiles with nuclear warheads.