Case File
The Estonian Defence Procurement Scandal
Contents
Introduction
Introduction
contentsThe Estonian Defence Procurement Scandal centres around a series of Estonian arms deals worth over €70 million, intended to secure artillery ammunition for Ukraine. Despite having little apparent experience in the ammunition trade, a small Italian-based Indian subsidiary, Datasel was awarded four contracts, with €59.8 million paid upfront by the end of 2024. The promised deliveries never materialised with huge delays for products, upon inspection deemed, not fit for purpose.
The failures caused a political firestorm in Estonia, with serious questions raised as to how Datasel was selected, the role of intermediaries and the oversight exercised by Estonia's defence authorities. After terminating the contracts, Estonia began efforts to recover the money. An audit by the National Audit Office exposed wider problems with procurement and financial controls, prompting a criminal investigation that was subsequently taken over by the European Public Prosecutor's Office. The controversy forced the resignation of Hanno Pevku, Estonia’s now former Defence Minister.
The shells are now being held in a storage facility in Romania while the dispute continues through the Estonian courts, international arbitration and a European investigation.
Case Details
Case details
contentsSeller country
India
Seller company
Datasel, Neco Defence Munitions
Buyer country
Estonia
Goods category
Artillery
Equipment sold
155 mm artillery shells
Deal value
€59.8 million
Start year
2023
Outcome status
Legal Investigation Ongoing, Trial Begun, Mixed
Actors
Actors
contentsDatasel S.R.L.: Italian-registered arms company; founded in La Spezia, Italy, in 2005 as a defence electronics business; acquired by India's Neco Defence Munitions in March 2024; awarded four Estonian procurement contracts for artillery ammunition intended for Ukraine, receiving approximately €59.8 million in prepayments.
Neco Defence Munitions: Indian arms company based in Nagpur, Maharashtra; acquired Datasel in March 2024; part of the Jayaswal Neco Group controlled by cousins Anand and Avneesh Jayaswal.
Estonia's Centre for Defence Investment (RKIK): Estonian government agency responsible for defence procurement and investment; contracted Datasel to supply artillery ammunition for Ukraine; made advance payments totalling approximately €59.8 million; headed by Magnus-Valdemar Saar during the initial procurement process.
Oculus Strategic Solutions: US-based consultancy and intermediary involved in facilitating contact between Datasel and Estonian defence officials; sought to act as an intermediary in the procurement deal but was ultimately excluded
Miava Capital: British company reportedly involved as a partner in the ammunition transaction between Estonia and Datasel; its precise contractual role and responsibilities remain unclear.
Hanno Pevkur: Estonia's Minister of Defence (July 2022–September 2026); introduced Eric Malmstead to RKIK's director, according to former RKIK chief Magnus-Valdemar Saar; resigned in September 2026 amid the procurement controversy.
Magnus-Valdemar Saar: Director General of Estonia's Centre for Defence Investment (RKIK) (2021-2025); responsible for Estonian defence investments and procurement; established communication with Eric Malmstead regarding potential weapons procurement; now works as CEO of Estonian arms company, Wolfram Europa.
Eric Malmstead: Intermediary who facilitated initial contact between Datasel and Estonia's Centre for Defence Investment; introduced to RKIK's director through a connection involving Defence Minister Hanno Pevkur.
Richard Goff: CEO of US-based Oculus Strategic Solutions; explained to ERR News that intermediaries had established contact with India's Neco Defence Munitions in 2022 while seeking ammunition components for Ukraine; involved in OSS's efforts to facilitate the Datasel procurement.
Timeline
Timeline
contents2022
- JulHanno Pevkur becomes Defence Minister. He subsequently oversees the country's defence policy and wider defence-sector administration.
- Following Russia’s invasion of Ukraine, European Union countries moved to expand their arms procurement in an effort to supply Ukraine with weapons. Among the companies seeking to capitalise on this surge in demand was Datasel, a small Italy-based arms company.
- According to Magnus-Valdemar Saar, former head of Estonia’s Centre for Defence Investment (RKIK), in an interview with Estonia’s public broadcaster ERR News, “The person who mediated Datasel was introduced to the RKIK director by Defense Minister Hanno Pevkur.” That intermediary was Eric Malmstead.
- US-based Oculus Strategic Solutions was the company that facilitated contact with Datasel. During a video call with ERR News, attended by Malmstead, the company’s CEO, Richard Goff, explained that intermediaries had established contact with Indian company Neco Defence Munitions in 2022. According to Goff, they had travelled to India at the request of a US defence-industry company to source ammunition components intended to support Ukraine.
2023
- 23 MarAt the European Council in Brussels, Estonia's Prime Minister Kaja Kallas proposed that EU member states jointly procure an additional one million 155mm artillery shells for Ukraine.
- 4 DecResponding to this increase in demand, Malmstead and Saar establish channels of communication to explore potential weapons procurement opportunities.
- 6 DecThe first meeting between Malmstead and Saar takes place. Following its initial efforts to facilitate the negotiations, Oculus Strategic Solutions (OSS) sought to act as an intermediary between Datasel and Estonia’s Centre for Defence Investment (RKIK). However, OSS was ultimately excluded from the deal. Despite this, Datasel reportedly owed OSS €1.8 million in consultancy fees for its involvement in the process.
2024
- JanDatasel updates its licence for weapons trading.
- 6 MarItalian-registered Datasel is acquired by Indian company Neco Defence Munitions controlled by cousins Anand and Avneesh Jayaswal. According to reports, neither companies had prior experience in either manufacturing or selling artillery shells.
- Datasel establishes contact with Estonian defence officials.
- AugFirst procurement contract signed. The Estonian Centre for Defence Investments (ECDI) signs an agreement with Datasel for artillery ammunition intended for Ukraine. An advance payment of approximately €15 million is made.
- OctA second contract signed with a further advance payment. Estonia reportedly makes an additional advance payment of approximately €10 million to Datasel.
- NovFirst delivery deadline missed. The first ammunition shipment was expected to reach Ukraine during November, but Datasel reportedly informed Estonia of problems and delays. Despite this, Estonia continued with the procurement relationship.
- DecTwo further contracts are concluded, bringing total advance payments to approximately €59.8 million. The funding is financed by the EU's European Peace Facility (EPF), and proceeds linked to frozen Russian assets, rather from the Estonian state budget. .
2025
- JanThe first significant delivery problems involving the Datasel contracts emerged in January or February 2025, according to Magnus-Valdemar Saar, then Director General of Estonia’s Centre for Defence Investment (RKIK). Deliveries were delayed, and the ammunition components supplied were found to be incomplete and below the required contractual standards. Essential components, including fuses, propellant charges and primers, were missing, rendering the ammunition unusable.
- Permanent Secretary of the Ministry of Defense Kaimo Kuusk told newspaper Postimees that representatives from the company met in Tallinn in spring 2025 to discuss the issues, but in the end the deliveries were cancelled altogether.
- 15 JulMagnus-Valdemar Saar leaves the RKIK after resigning from his position.
- In late winter 2025, RKIK reportedly put forward a written proposal to halt further ammunition contracts under the existing arrangement, which involved the use of EU and third-country funding. The proposal also called for the return of funds that had not yet been allocated to contractual commitments. Defence Minister Hanno Pevkur rejected the proposal, opting instead to continue facilitating the procurement of ammunition for Ukraine.
Outcomes
Investigation Outcomes
contents2025
- NovEstonia terminates its contracts with Datasel due to receiving inadequate products well after schedule and initiates arbitration proceedings alongside separate legal proceedings before the Harju County Court in Estonia. The Estonian authorities seek to recover €59.8 million in advance payments, in addition to compensation for contractual penalties and damages amounting to approximately €1.1 million. Datasel subsequently files a counterclaim against the Estonian authorities.
2026
- 27 AugEstonia's National Audit Office publishes an audit highlighting serious shortcomings in financial management, contract oversight and procurement procedures within the Ministry of Defence, including the Estonian Centre for Defence Investments (RKIK).
- The audit identifies €72.1 million in advance payments made to suppliers under the Ukraine ammunition procurement arrangements. Of this amount, €71.6 million is subject to disputes involving goods that have not been received. The largest outstanding issue concerns Datasel, to which RKIK had advanced €59.8 million.
- The National Audit Office describes Datasel as the supplier that had become the "biggest problem". It also raises questions about the transparency of the procurement process, noting that RKIK failed to provide requested contracts for examination. The auditors warn that the resulting financial exposure could leave the Estonian state budget facing costs of approximately €70 million.
- 1 SepReports begin to emerge that the Ministry of Defence had awarded a multi-million artillery contract to an Indian company with no record of ammunition sales. The scandal has now become public and receives nationwide coverage.
- 2 SepThe Estonian Prosecutor General’s office opens a criminal investigation following the audit findings into issues surrounding defence-sector finances.
- Hanno Pevkur announces his resignation as Defence Minister, accepting political responsibility for problems in Estonia's defence sector, but he does not accept personal responsibility, maintaining that individual procurement contracts are not personally negotiated by the Defence Minister.
- Meanwhile, Datasel claims it was “the victim” of the dispute, blaming the complicated supply chain for the delays and claiming no quality problems had been established in inspections conducted under the contracts.
- 3 SepPevkur’s resignation is reported internationally by Euronews in connection with the €70 million plus EU-funded procurement controversy.
- 8 SepIndian Defence Ministry officials describe Neco Defence Munitions as connected to an established Nagpur-based steel manufacturing business. That company is Jayaswal Neco Industries, who claim separately that Datasel is not its subsidiary or associate and that the Estonian dispute has no financial impact on its accounts. Neco Defence Munitions is still listed a subsidiary of Jayaswal Neco Industries Limited.
- 10 SepThe European Public Prosecutor's Office (EPPO) takes charge of investigating transactions between Estonia's Centre for Defence Investment (RKIK) and Datasel, after Estonia's Prosecutor General's Office concludes that information uncovered by the National Audit Office and subsequent media reporting provides grounds to suspect that a criminal offence may have been committed. As the transactions involved funds managed by the European Union, the investigation falls within the EPPO's jurisdiction.
- The investigation also brings renewed attention to other companies involved in the ammunition procurement arrangements, including British company Miava Capital, which reportedly acted as a partner in the transaction. The company's role, alongside that of its Australian director Noel Duigan, raises further questions about the network of intermediaries involved in the deal.
- 15 SepDatasel sends a proposal to the Estonian Government, Ministry of Defence and RKIK, offering to resolve the dispute through dialogue and complete the ammunition deliveries which are being held at an interim storage facility in Romania.
- 16 SepEstonia rejects Datasel's proposal.
- 20 SepReports confirm hat RKIK is fighting Datasel in arbitration at the International Chamber of Commerce (ICC) in Switzerland.
- 20 SepEstonia's Riigikogu Anti-Corruption Select Committee, chaired by Anastassia Kovalenko-Kõlvart, demands access to all correspondence between government officials and Datasel. The deadline for providing the requested material is set for 12 October.
- 5 OctIt is revealed that Estonia could be required to repay €14.5 million to Denmark and the Netherlands from its national budget, after donor money was used in failed advance payments for ammunition for Ukraine. The money came from classified donor countries, not only the European Peace Facility (EPF).
- 26 OctEstonia's Ministry of Defence establishes a working group to investigate the circumstances surrounding RKIK's dealings with Datasel. The group is tasked with examining the processes and decisions associated with the contracts.