Estonia spends 100 million euros a year on defence products and will not name the suppliers

Estonia spends 100 million euros a year buying defence products from Estonian companies for Ukraine. Each year the state funds products proposed by local firms, judged necessary by Ukraine and approved by the Ministry of Defence and the Estonian Center for Defense Investments. Which companies receive the money has not been published, and at the Defence Week trade fair in Tallinn this week the companies would not say whether the state had funded their products, because that information is classified.

The programme is one of the more consequential pieces of industrial policy in the region. It decides which companies get to build for a war, and get paid while doing it. The argument around it is not that the money has gone missing. It is whether a state can distribute 100 million euros a year, on the recommendation of a foreign army's needs, without saying who received it or on what basis.

What the state spends, and what it will not say

The industry association is broadly content with the criteria and less content with the process. Kalev Koidumäe, executive director of the Estonian Defence and Aerospace Industry Association, said he does not know how the decisions are reached.

Defence Minister Martin Herem's position is that the accounting is not in doubt, and that the disclosure will not change for now.

He added that in light of recent days it should be fairly clear why the identities of the companies are being withheld, and that he does not plan to change the practice at this point. The withholding has a security logic, and the ministry is the party that holds it. The question is whether that logic extends to the criteria as well as the names.

Parliament has asked for the documents

The Riigikogu's State Budget Control Select Committee has repeatedly requested the documents showing how the funds were distributed among companies, according to Urmas Reinsalu of Isamaa, and has not received them. Peeter Tali of Eesti 200, who chairs the Riigikogu's national defence committee, said he does not know how the money was distributed either, and that his committee would examine whether it went to companies that manufacture their own products and test them in Ukraine.

Tali described the original intent as letting Estonian companies improve their products under wartime conditions, with the capability kept at home if it is ever needed. The committee's job, as he put it, is to establish whether that intent became reality or whether this is simply business. The distribution list has not been published, and we have not seen it either.

The National Audit Office did not examine the transactions in detail in its completed audit and says it cannot say what grounds exist for classifying the information. Its principal auditor, Ines Metsalu-Nurminen, drew the distinction that applies to every closed procurement: parts of a file can be withheld, but that does not prevent officials from discussing the framework and the selection criteria in public.

The sector is not small, and it is growing

Estonia's defence industry had revenue of 750 million euros last year, two-thirds of it from exports. Defence Week, the trade fair, is in its second year and a third of the participants are Estonian companies, many of whose products have been used in Ukraine for years.

That mix is why the disclosure question carries commercial weight rather than only political weight. A founder deciding whether to build a defence company here reads these signals: what is bought, at what stage, and how a company gets onto the list. A programme that makes those decisions invisibly leaves an outsider with very little to go on, and the existing suppliers with an advantage they did nothing to earn.

Private capital is being invited into the same space

The relationship between the armed forces and private money grew closer last week. On 24 September the Estonian Defence Forces signed a three-year cooperation agreement with Archangel, a defence-focused venture fund founded in 2025 that backs British, Baltic and Nordic founders. It was signed at the ABCD conference by Major Ivo Peets, commander of the force transformation command, and Nicholas Nelson, Archangel's founder and managing partner.

The agreement is about information rather than money. The two sides will exchange views on needs and technologies, the defence forces will contribute their perspective on what they require, and the parties will support opportunities for companies to test and develop solutions in Estonia. Archangel's portfolio spans uncrewed maritime systems, battlefield software, secure operational infrastructure and artificial intelligence.

That is a normal arrangement in countries that buy from young companies, and a sensible one. It also places a private fund where it can learn what the customer wants, in a market where the customer's decisions about who gets paid are classified. The fund has no procurement role under the agreement, and nothing about the arrangement is improper. The point is narrower: the disclosure question now covers a wider set of relationships than it did last month.

The same question, smaller, on the startup side

Two weeks earlier the argument arrived in the grant system. Liina Vahtras became minister of economic affairs and industry on 16 September, having been head of the e-Residency programme at the Estonian Business and Innovation Agency and, from last summer, a member of the agency's management board. While on that board she was also the sole management board member of Rochna Invest OÜ.

The Center Party's Lauri Laats said that publicly available information showed roughly 1.25 million euros of agency support going to companies in the Rochna portfolio during that overlap: slightly more than 454,000 euros to Bisly in October, and 803,665 euros to Antegenes and Bidrent between them. Vahtras said she declared the connection to the agency, held no ownership in the company, took no board fee or other income from it, and did not take part in processing or deciding the grants, which went to companies where Rochna holds stakes of 1.83, 2.07 and 4.87 per cent. She said she would leave the Rochna board as soon as the change could be formalised. The prime minister, Kristen Michal, said she acted in accordance with the rules.

No finding of wrongdoing has been made, and the minister's account is that the money went to companies she had no role in assessing. The question Laats raised is the same one the audit office raised about defence: whether recusing oneself from a decision is enough, or whether a public body also has to be able to show that the process looked clean from outside.

What to watch

• Whether the budget control committee gets the distribution list. Refusing a parliamentary committee is a larger problem than refusing a journalist.
• Whether the National Audit Office adds the programme to its plan. It has said the transactions were not examined in detail, which leaves 100 million euros a year outside detailed audit.
• Whether the selection criteria are published even if the names are not. That is the version of disclosure the auditor and the industry association both asked for, and it costs nothing.
• Whether any supplier says publicly that it was funded and for what. A company naming its own contract would demonstrate the programme's value more convincingly than a classified ledger.
• Whether the Archangel agreement produces anything checkable, such as a specific company testing a specific product with the defence forces.
• Whether the grant rules at the economy ministry change. The answer that the rules were followed is often the answer that precedes a rule change.

Nothing here alleges that money was wasted or that a contract went to the wrong company, and the minister's account is that the defence ledger is exact. The complaint is narrower and easier to fix than a scandal. The state asks companies to build for a war, pays 100 million euros a year for the privilege, and treats the selection criteria as a secret. The reaction of the companies is a fair guide to what that produces. Asked at their own trade fair whether the state had funded their products, they said nothing at all.