Estonia’s Defence Minister Hanno Pevkur has stepped down following a scandal over a ₹769 crore ammunition procurement deal intended to support Ukraine.

The controversy centres on contracts signed in 2024 by Estonia’s Centre for Defence Investments with Datasel SRL, a company registered in Italy but acquired by India’s Neco Defence Munitions earlier that year.

The firm had no prior record of selling artillery shells, yet was entrusted with supplying critical munitions at a time when Ukraine faced severe shortages.

Pevkur, who had served as defence minister since 2022, announced his resignation on Wednesday, citing political responsibility after Estonia’s National Audit Office raised serious concerns.

In his statement, he emphasised that national security was a collective responsibility and that he must pass the baton to the prime minister at the right time. His departure comes amid mounting criticism of the ministry’s handling of defence funds and procurement processes.

Estonia used money from the EU’s European Peace Facility to finance the deal, paying Datasel millions of Euros upfront. The first contract in August 2024 saw an advance payment of about ₹134 crore, followed by another in October with more than ₹89 crore.

By the end of the year, several contracts had pushed total advance payments to around ₹769 crore. Deliveries were repeatedly delayed due to reported production problems, and when ammunition finally arrived in 2025, reports indicated it failed to meet quality standards.

Datasel disputes Estonia’s termination of the contracts, claiming it delivered munitions worth ₹648 crore before the agreements were cancelled. The company insists it suffered losses and has taken the matter to international arbitration in Strasbourg.

Datasel argues that the reasons given for termination were contradictory and maintains it remains willing to complete the contract if Estonia fulfils its obligations. It confirmed receiving ₹648 crore in advance payments and submitted invoices totalling ₹640 crore, while rejecting claims of poor quality.

Estonia’s Centre for Defence Investments has demanded the return of the ₹769 crore paid, but the dispute has now escalated to the European Arbitration and Mediation Centre. Elmar Vaher, director general of the Centre, admitted the deal should never have been signed, likening it to hiring a company with no experience to build a house. He said doubts about the firm’s ability to deliver were justified.

The National Audit Office’s report released on 28 August highlighted flaws in the management of defence funds and accounting practices. It warned Estonia might have to cover the ₹769 crore from its own budget if EU funding cannot be recovered.

The European Commission has also engaged with Estonian authorities, stressing safeguards to protect EU taxpayers’ money.

Prime Minister Kristen Michal stated earlier that he did not see personal fault in Pevkur’s actions but acknowledged that political responsibility applied. Pevkur defended his record, pointing to Estonia’s sharp rise in defence spending since Russia’s full-scale invasion of Ukraine in 2022.

He stressed that Estonia was better protected than ever and reaffirmed the country’s commitment to supporting Ukraine, noting that aiding Kyiv also strengthened Estonia’s own security.

Estonia, with a population of about 1.2 million, is a member of both the EU and NATO and shares a border with Russia. The war in Ukraine has heightened security concerns in the Baltic state, where Moscow’s aggression is seen as a direct threat.

The scandal has cast a shadow over Estonia’s defence procurement system, raising questions about oversight and accountability at a time when the country is deeply engaged in supporting Ukraine’s war effort.

Agencies