Estonia’s defence minister resigns after a €70 million Ukraine shell deal collapses

Estonian Defence Minister Hanno Pevkur resigned on 2 September after the National Audit Office found serious failures in defence accounting and after it became public that his procurement agency had paid about €70 million in advances for artillery shells that never reached Ukraine.

Pevkur made the announcement on the public broadcaster ERR's evening programme Aktuaalne kaamera. He said the auditor's criticisms of the Defence Forces and the Estonian Centre for Defence Investments, known as RKIK or ECDI, were serious enough that he should take political responsibility for the whole defence sector. He will stay in post until Prime Minister Kristen Michal names a successor. Parliament returns from its summer recess on 14 September.

The shell file is the sharpest part of a wider audit. In 2024 RKIK signed four contracts with Datasel S.R.L., a small Italian-registered firm acquired that March by Neco Defence Munitions, an Indian-owned defence business. Neither company had a record of selling artillery shells. The first contract was signed in August 2024 with a €15 million advance. Across the four deals the advances came to about €70 million. Estonia used money from the European Union's European Peace Facility to make those payments.

The ammunition was not delivered. Estonia is now pursuing Datasel through its own courts and through international arbitration to recover the funds. Prosecutors said on Tuesday that criminal proceedings had been opened over irregularities inside the defence ministry's area of responsibility. Former RKIK director Magnus-Valdemar Saar has said that major decisions were taken with the approval of ministry leaders, including Pevkur, then secretary general Kusti Salm, and Salm's successor Kaimo Kuusk.

Pevkur's defence is institutional. He told ERR that a minister does not negotiate contracts or count ammunition. The political decision, he said, was to support Ukraine. Finding counterparties and writing the paperwork sat with RKIK. Michal said he saw no personal fault in the minister but did not rule out political responsibility and called a cabinet meeting with the auditor general for 3 September. Pevkur later told Delfi that he no longer commanded a parliamentary majority.

The audit goes beyond one supplier. Auditors said they could not establish the accuracy of an inventory balance of about €1.2 billion because of gaps in Defence Forces stock records. They also found weaknesses in contract monitoring and in the procedures used to verify that goods had actually arrived. Those findings matter in a country that has raised defence spending to 5.4 percent of GDP in 2026, up from about 3.3 percent in 2025, and that presents itself as a model of how a small NATO state arms both itself and Ukraine.

Pevkur, a Reform Party minister, has held the defence portfolio since July 2022. That period covers the sharpest rise in Estonian military outlays since restoration of independence and a run of urgent purchases for Kyiv. Speed was treated as a virtue. The Datasel contracts show the cost of treating speed as a substitute for due diligence. An unused Italian shelf company, an Indian buyer with no shell history, and four advance-heavy contracts produced a hole in an EU financing instrument that was meant to put rounds on Ukrainian guns.

The political timing is awkward in a second way. Estonia elected Ülle Madise president this week with no rival on the ballot. The country is trying to project institutional calm while it spends at wartime rates. A defence minister leaving over a failed munitions buy for Ukraine undercuts that message inside NATO and inside the European Peace Facility, whose contributors will want to know how an advance of this size left the building without a corresponding delivery.

What Michal now has to decide is whether the next minister inherits RKIK as it stands or whether the agency itself is rebuilt before the autumn sitting. The court cases against Datasel will run for years. The inventory gap of €1.2 billion will not close in a single cabinet meeting. Pevkur's resignation answers the demand for a name. It does not put the missing shells in Ukraine or restore the money that paid for them.