The scandal has placed Datasel SRL, an Italian company acquired by Nagpur-based Neco Defence Munitions, at the centre of the controversy and raised questions over the handling of Estonia’s ammunition procurement contracts.
Pevkur, who has served as defence minister since 2022, announced on Wednesday that he was ready to take political responsibility following a series of findings by Estonia’s National Audit Office.
“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 and pass on the baton of the minister of defence to the prime minister at a suitable time,” Pevkur said in a social media post.
According to ERR, the English-language service of Estonia’s public broadcaster, at the centre of Pevkur’s resignation are multiple contracts signed by Estonia to purchase artillery shells for Ukraine using money from the European Union’s European Peace Facility.
The ammunition was to be supplied by Datasel SRL, an Italian firm acquired by Nagpur-based Neco Defence Munitions. However, neither Datasel nor its Indian owner had previously produced the artillery shells Estonia sought to procure.
The controversy dates back to August 2024, when the Estonian Centre for Defence Investments signed its first contract with Datasel and transferred €15 million (Rs 164 crore) as an advance payment. A second contract followed in October, involving another advance payment of more than €10 million (Rs 109 crore).
Additional contracts followed, eventually taking the advance payments to roughly €70 million (Rs 768 crore).
The first lot of ammunition was expected to arrive in Ukraine in November 2024, but deliveries were delayed. Estonia also claims that some of the ammunition that did arrive failed to meet the required standards.
The Estonian government subsequently cancelled the contracts, leading to a court case. Datasel argues that it could have met all its obligations had Estonia not terminated the contract.
Datasel was founded in 2005 by Italian businessman Sandro Pazzini. In 2023, the company had only a handful of employees and turnover of just over €120,000.
According to ERR, neither Datasel nor Neco Defence had previous experience with contracts of this kind. It also remains unclear whether Neco planned to manufacture the ammunition in India or whether Datasel intended to purchase it from another producer and supply it to Estonia as an intermediary.
Datasel has disputed Estonia’s version of events. While acknowledging that there were delays, the company has maintained that the issue was not related to quality.
In a statement to Euractiv on Wednesday evening, the company said it was “the victim” of the dispute and rejected the grounds for termination. Datasel said it had supplied and invoiced €58 million worth of material against €59 million in advance payments and that no quality problems had been established during inspections conducted under the contracts.
“The contracts between the parties involved a complex international supply chain and, as is typical for projects of this nature, their execution required multiple approvals, authorisations and clearances involving various governments, regulatory authorities and other stakeholders in different jurisdictions,” the company said.
“During the project, certain governmental and regulatory approvals were delayed due to issues and requirements relating to the relevant documentation and approval processes,” it added.
Speaking to Eesti Ekspress, the company also said, “Datasel is the party that has suffered losses in connection with these supply contracts. The actions of the Estonian Center for Defense Investments, particularly the reasons given for the extraordinary termination of the contracts, are contradictory and illogical.”
The dispute has now escalated from a delayed ammunition procurement programme into a political and legal controversy, culminating in the resignation of Estonia’s defence minister over the handling of the contracts and the use of EU funds intended for ammunition purchases for Ukraine.
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