Estonian Defence Minister Hanno Pevkur has resigned, taking political responsibility for a controversial €70 million (around Rs 770 crore) ammunition procurement intended to supply 155mm artillery shells to Ukraine.
Pevkur announced his resignation on September 2 after Estonia's National Audit Office raised serious concerns about defence-sector procurement and financial controls. The controversy centres on a deal involving Datasel S.R.L., an Italy-registered company owned by Indian defence manufacturer Neco Defence Munitions.
The procurement was financed through the European Union's European Peace Facility (EPF). Deliveries were delayed, while ammunition that eventually arrived was criticised by Estonian authorities as incomplete and of insufficient quality. The supplier, however, has disputed Estonia's account and says it was capable of fulfilling the contract.
Pevkur takes political responsibility
Pevkur, who had served as defence minister since 2022, said his decision was based on political responsibility rather than personal involvement in negotiating the contracts.
He argued that a defence minister cannot personally handle every procurement detail but remains responsible for the wider ministry and defence sector. The Estonian government confirmed his departure, with Prime Minister Kristen Michal beginning the process of finding his successor.
The resignation followed growing political pressure after the National Audit Office criticised activities within Estonia's defence establishment and procurement agencies.
€70 million deal under scrutiny
The ammunition contract was signed in 2024 as European countries sought to increase artillery supplies for Ukraine amid its war with Russia.
Estonia's Centre for Defence Investments (RKIK) made advance payments totalling about €70 million for ammunition from Datasel. Reports said the company did not have an established track record of selling artillery shells when the agreement was made.
The arrangement subsequently ran into delays, with ammunition deliveries failing to meet the expected schedule.
The National Audit Office has warned that Estonia could ultimately face a financial loss if the advance payments cannot be recovered.
Ammunition quality dispute
The dispute intensified after ammunition was eventually delivered.
Pevkur later told ERR that the ammunition should not be described as completely useless, but said it was of insufficient quality and incomplete.
Estonia subsequently terminated the contracts and the financial dispute moved towards arbitration.
The case has also prompted questions over how the procurement was evaluated before the government committed such a large advance payment.
Indian-owned firm rejects claims
The company at the centre of the controversy has rejected Estonia's version of events.
According to ERR, the Indian-owned firm says it delivered the bulk of the contracted munitions and could have completed its obligations had Estonia not terminated the agreement.
The dispute therefore remains unresolved. The allegations against the supplier should not be treated as established wrongdoing, with the company contesting the grounds for contract termination.
The Indian connection stems from Neco Defence Munitions' ownership of Datasel, the Italy-registered company that signed the Estonian contracts.
EU funds add pressure
The deal was financed through the EU's European Peace Facility, which has been used extensively to support Ukraine's military requirements.
The failed procurement has consequently raised questions beyond Estonia's own defence budget. The European Commission has indicated that it is not yet clear whether Estonia will have to repay funds received through the facility.
Estonia could also face pressure to cover losses from its national budget if the advance payments cannot be recovered.
The episode comes at a sensitive time for Estonia, which has sharply increased defence spending in response to Russia's war in Ukraine.
Audit exposes procurement concerns
The ammunition dispute emerged alongside broader criticism of Estonia's defence-sector financial management.
The National Audit Office's findings prompted scrutiny of the Defence Ministry, the Estonian Defence Forces and RKIK. The agency's director general has acknowledged that the organisation failed to ensure that the €70 million contract reached the auditors despite repeated requests.
Political opposition figures called for Pevkur's resignation, increasing pressure on the minister to accept responsibility.
A criminal investigation has also been opened into issues covered by the audit reports, adding another layer to the controversy.
Ukraine support faces test
The controversy comes as Estonia continues to position itself as one of Ukraine's strong European supporters.
The original procurement was intended to help address Ukraine's continuing need for artillery ammunition. But the failure of the contract has highlighted the risks governments face when attempting to secure military supplies quickly amid wartime demand.
For Estonia, the immediate priorities are recovering the money, resolving the contract dispute and strengthening procurement oversight.
For the Indian defence industry, the case has attracted international attention because of Neco Defence Munitions' ownership of the supplier. However, the company's competing account means the commercial and legal dispute is still far from settled.
Pevkur's resignation has therefore ended one chapter of the controversy, but the financial, legal and procurement questions surrounding the €70 million deal remain unresolved.
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