Estonian Defence Minister Hanno Pevkur resigned on Wednesday, taking political responsibility for a controversial €70 million (around Rs 770 crore) ammunition deal intended to supply 155mm artillery shells to Ukraine. Estonia’s public broadcaster ERR reported that Pevkur stepped down after a critical report by the country’s National Audit Office raised questions on the procurement process and the handling of the contract.

The deal was funded through the European Union’s European Peace Facility (EPF). Estonia awarded the contract to Datasel SRL, an Italian-registered company owned by Nagpur-based Neco Defence Munitions. Neco Defence Munitions is a subsidiary of the Jayaswal NECO Group. The contract later became the centre of a political and legal dispute after the ammunition deliveries faced delays and authorities raised concerns about the quality of some supplies.

Pevkur had served as Estonia’s defence minister since July 2022. He was also the country’s longest-serving cabinet minister. Announcing his resignation, he said he was taking political responsibility for the wider defence sector.

"Estonian security is not a one-man project. It is our joint responsibility. That is why I must take political responsibility for the entire defence field today," Pevkur said in a social media post announcing his decision.

Estonia’s Defence Ministry also confirmed his departure.

The controversy began with contracts signed in 2024 by the Estonian Centre for Defence Investments (ECDI). The agency awarded the contracts to Datasel SRL. Neco Defence Munitions had acquired the Italian company in March 2024, shortly before the ammunition contract was awarded.

Estonia paid around €70 million upfront from EU funds to secure the artillery ammunition. The procurement came at a crucial time for Ukraine, which was facing a major shortage of artillery shells during its war with Russia. The agreement was aimed at supplying 155mm shells needed by Ukrainian forces.

However, questions emerged over Datasel’s ability to fulfil the contract. Neither Datasel nor its Indian parent company had a previous record of manufacturing or supplying artillery shells when the contract was agreed. Estonia later faced delays in receiving the ammunition.

Authorities also raised concerns over the quality and safety of some of the initial batches delivered under the contract. The problems eventually led Estonia to terminate the agreement in 2025. The country then began legal proceedings at a European arbitration court to recover the money paid under the deal.

Estonia’s Prosecutor’s Office also launched a criminal investigation into the procurement process. The investigation added to the political pressure surrounding the contract and raised questions over how the deal was approved and monitored.

Jayaswal NECO and Datasel have rejected allegations of wrongdoing. The companies have disputed claims that the ammunition failed to meet the required standards. They argue that the dispute is related to changes in European regulations and funding arrangements rather than problems with the quality of their products.

Datasel has also filed a counterclaim against the Estonian government. The company is seeking damages worth tens of millions of euros, arguing that Estonia ended the contract prematurely.

Company executives said Datasel had delivered and invoiced goods worth €58 million after receiving €59 million in advance payments. They also claimed that Estonian officials had inspected the goods before the government stopped the contract.

The company further said Estonia cancelled the agreement after informing it that "EU funds had lapsed". According to Datasel, this decision left a large quantity of completed ammunition inventory unused.

The dispute has now developed into a wider political issue for the Estonian government. Pevkur’s resignation comes at a difficult time for the ruling coalition, which lost its parliamentary majority in August 2026. Opposition lawmakers had also been preparing a no-confidence motion against Pevkur after a parliamentary committee raised questions on the ammunition procurement.

The government is now working with the European Commission to recover the funds linked to the failed deal. The legal dispute between Estonia and Datasel is also continuing as the company seeks compensation from the Estonian government.

Pevkur’s resignation marks a major political fallout from the procurement controversy. The case has raised questions over Estonia’s defence procurement system, the use of EU funds and the government’s oversight of contracts linked to military supplies for Ukraine. The ongoing legal and criminal proceedings are expected to determine responsibility for the failed agreement and the financial losses.