Estonia's Defense Minister, Hanno Pevkur, stepped down on September 3, taking political responsibility for a disastrous €70 million procurement deal intended to supply critical artillery shells to Ukraine. The agreement, which involved an Italian-registered firm linked to an Indian company, resulted in zero usable deliveries and a high-stakes legal dispute.
Botched Procurement Unveiled
The failed operation centered on Datasel SRL, a company acquired by India’s Neco Defense Munitions in early 2024. Despite having no prior experience in selling artillery shells, Datasel SRL secured a series of contracts with Estonia's Centre for Defense Investments (RKIK).
The procurement was funded by the European Union’s European Peace Facility, aiming to alleviate severe frontline shortages in Kyiv within months. Initial contracts were signed in August 2024, with an upfront payment of approximately €15 million. A second deal in October 2024, along with subsequent agreements through the end of the year, pushed total advance payments to roughly €70 million.
Quality Issues and Contract Termination
Deliveries, which were expected in 2025, faced repeated delays due to production issues. When ammunition finally arrived, Estonian media outlet Eesti Ekspress reported that it failed to meet the required quality standards. Consequently, RKIK terminated the contracts last autumn (2025) and demanded a full refund of all advance payments.
Elmar Vaher, director general of the Centre for Defense Investments, acknowledged the error in hindsight. "In my opinion, we should not have signed a contract with them," Vaher told Eesti Ekspress. "If I start building a house and hire a company that has never built houses before, there is a doubt that the house will not be finished."
Legal Battle and Political Fallout
Datasel SRL and Jayaswal NECO have vehemently denied any wrongdoing, asserting that the dispute stems from changes in European regulations and funding arrangements, not ammunition quality failures. Datasel has filed a counterclaim against the Estonian government, seeking millions in damages for what it describes as premature contract termination. The matter is now proceeding to international arbitration at the European Arbitration and Mediation Centre in Strasbourg, France.
The controversy escalated after a report from Estonia's National Audit Office on August 28 highlighted significant flaws in defense fund management and asset accounting within the ministry. The audit warned that if EU funding could not be recovered, Estonian taxpayers might be liable for the entire €70 million.
In response to the audit findings, Minister Pevkur stated, "Estonian security is not a one-man project. It is our joint responsibility. That is why I must take political responsibility for the entire defense field today and pass on the baton of the minister of defense to the prime minister at a suitable time." While Prime Minister Kristen Michal saw no personal fault on Pevkur's part, he affirmed the necessity of political accountability.
The European Commission has engaged with Estonian authorities, confirming that safeguards and recovery procedures are in place to protect EU taxpayer money. Pevkur maintained that Estonia's overall defense trajectory and increased spending since the 2022 invasion of Ukraine remain strong, emphasizing continued support for Ukraine as crucial for Estonia's own security.