Estonia, one of Europe’s most vocal supporters of Ukraine, is now grappling with an embarrassing question: how did a government end up paying tens of millions of euros upfront for artillery ammunition to companies that had never previously sold a single artillery shell?
The fallout has already reached the top.
Estonian Defence Minister Hanno Pevkur announced his resignation on September 2, saying he was accepting political responsibility for problems in the country’s defence sector. His resignation came after the National Audit Office raised serious concerns about defence spending and procurement, including the functioning of the Estonian Centre for Defence Investments (ECDI), the agency responsible for military procurement.
At the heart of the controversy is a 2024 procurement agreement for artillery ammunition intended for Ukraine. Estonia ultimately paid about €70 million in advance, with the money coming through the EU’s European Peace Facility (EPF). The intended supplier was Datasel S.R.L., an Italy-registered company acquired by India’s Neco Defence Munitions in March 2024. According to reports, neither the companies nor their relevant operations had a previous record of selling artillery shells.
What followed was a procurement nightmare involving delayed deliveries, disputed quality, terminated contracts, arbitration, and now a ministerial resignation.
The €70 million ammunition deal
The story begins in 2024, when Estonia was attempting to secure artillery ammunition for Ukraine at a time when Kyiv was desperately seeking more shells for its war against Russia.
The Estonian Centre for Defence Investments signed multiple contracts with Datasel. The first agreement in August 2024 was accompanied by an advance payment of approximately €15 million. A further €10 million was reportedly paid in October. Additional contracts followed, eventually taking the advance payments to roughly €70 million.
The urgency was understandable. Ukraine’s artillery ammunition requirements were enormous, while European countries were under pressure to increase military assistance.
But urgency appears to have come with a price: risk.
Estonian officials acknowledged that the procurement involved greater-than-usual risks because of the need to get ammunition to Ukraine quickly.
The companies involved, however, had never previously sold artillery shells.
That is the detail that has turned an ordinary procurement dispute into a political scandal.
Where did the €70 million go?
The simple answer is: it has not simply vanished, but a huge chunk of the money is stuck in a legal dispute.
Estonia says ammunition deliveries were delayed and that inspections subsequently found problems with the material supplied.
The Estonian side terminated the contracts and took the matter to arbitration. Estonian media have reported that between €60 million and €70 million in advance payments are caught up in the dispute. Tallinn is also working with the European Commission on how the money can be recovered.
The National Audit Office has warned of an even more uncomfortable possibility: Estonia could ultimately have to cover around €70 million from its own state budget if the money cannot be recovered.
In other words, money intended to facilitate military support for Ukraine could end up becoming a liability for Estonia itself.
And that is where the political embarrassment becomes much larger than a delayed arms shipment.
The ammunition itself is disputed
Estonia’s version is that the material supplied did not meet the required standards.
Estonia’s current Defence Ministry leadership has described shipments as incomplete or unsuitable. According to ERR, an artillery round requires components including a fuse, propellant charge and primer; Estonian officials said the shipment they rejected lacked essential components.
But Datasel has rejected Estonia’s account.
In a statement reported by Euractiv, the company described itself as the victim of the dispute. Datasel said it had supplied and invoiced approximately €58 million worth of material against about €59 million in advance payments and disputed the claim that quality problems had been established by the relevant inspections.
The company also blamed delays in approvals, authorisations and documentation involving multiple countries and regulatory authorities. It said Estonia later refused to accept some material that was ready for delivery or already in production before terminating the contracts.
Therefore, calling this a proven “€70 million fraud” would go beyond what has been established.
The facts currently point to a deeply troubled procurement contract, a substantial amount of money tied up in litigation/arbitration and competing claims over deliveries and quality.
The legal dispute remains unresolved.
Why is an Indian company involved?
This is where the controversy has acquired an Indian angle.
Datasel S.R.L. is registered in Italy but was acquired by Neco Defence Munitions, an Indian company, in March 2024. Estonia subsequently contracted Datasel to supply artillery ammunition.
The important caveat is that the controversy does not establish that Neco Defence Munitions committed fraud.
Nor does the resignation of Estonia’s defence minister amount to a finding of criminal wrongdoing by the Indian-owned company.
Datasel has expressly rejected Estonia’s allegations and maintains that the contract was disrupted by factors including regulatory approvals and Estonia’s refusal to accept certain material. The dispute is now being fought through arbitration.
So the striking question is not simply, “How did an Indian company scam Estonia?”
It is more accurately:
Why did Estonia choose a supplier with no established track record of selling artillery shells for a wartime procurement worth tens of millions of euros, and why were such large sums paid upfront?
That is the procurement question now hanging over Tallinn.
The minister says: I did not negotiate the contract
Pevkur has attempted to distinguish between political responsibility and operational responsibility.
He said the defence minister does not personally negotiate individual procurement contracts or scrutinise every piece of ammunition being purchased.
But that defence did not prevent him from accepting political responsibility.
“A leader must have the courage to take responsibility,” Pevkur said while announcing his resignation. He argued that although the minister does not conduct individual contract negotiations, the National Audit Office’s findings concerning the defence forces and ECDI raised a question of political responsibility.
Pevkur had served as defence minister since July 2022.
He also maintained that Estonia had made the right strategic choices in strengthening its defence capabilities and argued that continued support for Ukraine remained vital to Estonia’s own security.
But politically, the argument was difficult to sustain.
The National Audit Office had already raised concerns about Estonia’s defence-sector financial management and procurement. A criminal investigation into issues surrounding defence-sector finances has also been opened following the audit findings. (euronews)
The ammunition controversy therefore arrived at precisely the wrong time.
Why was Estonia using EU money?
There is another important layer to the story.
The ammunition procurement was linked to the European Peace Facility, the EU mechanism used to support military assistance and strengthen the defence capabilities of partner countries, including Ukraine.
The EU has increasingly channelled the extraordinary revenues generated from immobilised Russian sovereign assets towards Ukraine. In July 2024, the European Commission announced that €1.4 billion of the first €1.5 billion tranche of such revenues would go through the European Peace Facility for military equipment, including artillery ammunition. (Enlargement and Eastern Neighbourhood)
So this was not simply Estonia spending €70 million of its own money on a failed procurement.
The transaction was part of a much broader European effort to get weapons and ammunition to Ukraine.
That makes the procurement failure particularly awkward.
The EU was attempting to use Russian-linked windfall revenues to help Ukraine defend itself against Russia. Instead, a substantial amount of the money involved in one procurement has become entangled in a dispute between a European government and an Indian-owned ammunition company.
The bigger problem: wartime urgency versus procurement safeguards
The episode exposes a dilemma that goes well beyond Estonia.
Ukraine needs ammunition immediately. European governments want to replenish their own stocks while simultaneously supplying Kyiv. Defence manufacturers are under pressure to increase production. And governments have to make procurement decisions much faster than they ordinarily would.
But defence procurement is precisely where haste can become expensive.
Estonia appears to have accepted greater procurement risk because of the urgency surrounding Ukraine’s ammunition requirements. The question now is whether the safeguards were strong enough to prevent that risk from turning into a potential €70 million liability.
The fact that the supplier had no established track record in selling artillery shells makes the question even more uncomfortable.
A government can take a calculated risk on an untested supplier.
But when the bet involves tens of millions of euros in advance payments—and the product is ammunition required for an active war—the consequences of getting that calculation wrong are considerably greater.
What happens now?
Pevkur’s resignation does not resolve the dispute.
Estonia is pursuing arbitration and seeking to recover the money. The European Commission is also in contact with Tallinn over the fate of the funds. Commission spokesman Christian Wigand said there are safeguards and recovery procedures designed to ensure EU taxpayers’ money is properly spent, while declining to give details about the ongoing discussions.
The criminal investigation and the National Audit Office’s findings will also keep the spotlight on Estonia’s defence procurement system.
For Estonia, the episode is an uncomfortable lesson in the risks of wartime procurement.
For the European Union, it raises questions about how quickly billions in support can be deployed without compromising financial safeguards.
For Ukraine, it highlights the practical problem behind Europe’s promises of ammunition: getting shells from a government ledger to an artillery unit is considerably more complicated than announcing another aid package.
And for India, the controversy has drawn attention to an Indian-owned defence manufacturer, but it is important not to confuse an unresolved contractual dispute with a proven fraud case.
The most damaging fact for Estonia is already beyond dispute: around €70 million was paid upfront in an ammunition procurement that subsequently unravelled, and the country’s defence minister has now stepped down, taking political responsibility for the wider failures in the defence sector.
The ammunition may still become part of a legal accounting between Estonia and Datasel.
But politically, the bill has already arrived.
