Estonia’s Defence Minister Hanno Pevkur has resigned after a €70 million ammunition procurement deal meant to support Ukraine turned into a major political and financial controversy.
The deal involved an Italian-registered company acquired by India’s Neco Defence Munitions in 2024. The company, Datasel SRL, reportedly had no previous record of selling artillery shells before the contracts were signed.
Pevkur, who had served as Estonia’s defence minister since 2022, announced his resignation on Wednesday, saying he was taking political responsibility following critical findings by Estonia’s National Audit Office.
“Estonian security is not a one-man project. It is our joint responsibility.”
Pevkur said he would hand over the defence portfolio to the prime minister at a suitable time.
How the €70 Million Deal Unfolded
The controversy goes back to contracts signed in 2024 by Estonia’s Centre for Defence Investments with Datasel SRL.
The aim was to purchase artillery ammunition for Ukraine at a time when Kyiv was facing serious ammunition shortages.
Estonia used money from the European Union’s European Peace Facility for the procurement and made large advance payments to the company.
The first contract was signed in August 2024, with around €15 million paid upfront. A second agreement followed in October, accompanied by another advance payment of more than €10 million.
By the end of 2024, several additional contracts had pushed the total advance payments to around €70 million.
The ammunition was expected to reach Ukraine within months. However, deliveries were repeatedly delayed because of reported production problems.
When ammunition was eventually received in 2025, it was reported to have failed quality requirements.
Company Disputes Estonia’s Action
Datasel has strongly challenged Estonia’s decision to terminate its contracts.
The company says it supplied around €59 million worth of munitions to the Estonian state before the contracts were cancelled. It has also taken legal action against Estonia, with the dispute now moving to international arbitration.
Through its lawyer, Datasel said it was the party that suffered losses from the supply contracts and argued that the reasons given by Estonia for terminating the agreements were contradictory and illogical.
The company confirmed receiving €59 million in advance payments from Estonia’s Centre for Defence Investments.
It said it had supplied a significant quantity of goods and submitted invoices worth around €58 million.
Datasel acknowledged that there had been delays but rejected claims that the ammunition supplied was of inadequate quality.
The company said it was eventually informed that the Estonian defence procurement body could not accept the remaining goods. It maintained that it was still prepared to complete the contract if Estonia fulfilled its own obligations.
Estonia Seeks Recovery of the Money
The Estonian defence procurement authority terminated its contracts with Datasel last autumn and demanded that the advance payments be returned.
Estonia has since taken the dispute to the European Arbitration and Mediation Centre in Strasbourg, France, as it seeks to recover the approximately €70 million paid for the ammunition.
The exact whereabouts of the difference between the €70 million procurement value cited by Estonia and the €59 million in advance payments acknowledged by Datasel have also raised questions. The information provided does not establish where the remaining amount went.
Elmar Vaher, director general of Estonia’s Centre for Defence Investments, said the contract should not have been signed.
He compared the decision to hiring a company to build a house despite knowing that it had never built one before.
Audit Raises Questions Over Defence Spending
The ammunition controversy has also come alongside wider criticism of how Estonia’s defence funds and military assets have been managed.
An audit released on August 28 by Estonia’s National Audit Office highlighted problems involving the use of funds and the accounting of assets within the defence ministry. Similar concerns had reportedly been raised earlier as well.
The watchdog warned that Estonia could eventually have to use its own state budget to cover around €70 million if the EU funding cannot be recovered.
The European Commission has also been in contact with Estonian authorities over the disputed money. Commission spokesperson Christian Wigand said the EU had safeguards and recovery procedures in place to ensure that taxpayers’ money was properly used.
Pevkur Says Political Responsibility Still Matters
Pevkur defended the division of responsibilities within Estonia’s defence system.
He said the defence minister does not personally handle individual procurement contracts or negotiate every agreement.
However, he acknowledged that the criticism of the defence forces and the Centre for Defence Investments raised a broader question of political responsibility.
While announcing his resignation, Pevkur said he believed Estonia had made the right decisions to strengthen its national defence.
He also pointed to the country’s significant increase in defence spending since Russia’s full-scale invasion of Ukraine in 2022.
Prime Minister Says Pevkur Was Not Personally at Fault
Estonian Prime Minister Kristen Michal had previously said he did not believe Pevkur was personally at fault in the matter.
However, Pevkur decided to step down, saying that political responsibility ultimately had to be taken for the wider defence sector.
He also stressed that Estonia is now better protected than it was before and said the country must continue supporting Ukraine because doing so also contributes to Estonia’s own security.
Why the Deal Matters to Estonia
Estonia is a small country of around 1.2 million people and is a member of both the European Union and NATO. It shares a border with Russia.
Russia’s war in Ukraine has heightened security concerns in Estonia, where the conflict is viewed as a direct threat.
The Estonian government has been a strong supporter of Ukraine, making the ammunition procurement an important part of its wider security and military support efforts.
The resignation of Pevkur now puts the spotlight on how the €70 million procurement was approved, why such large advance payments were made, why deliveries were delayed and whether Estonia and the EU will be able to recover the money.
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