Defense Minister Hanno Pevkur (Reform) said Estonia did not miss out on the Rheinmetall ammunition plant going to Latvia as it is nearing more suitable deals, however.

The developments come as all three Baltic states work to establish domestic large-caliber ammunition production in the changed security situation.

Latvia announced on Thursday an agreement with major German arms producer Rheinmetall to establish a €275-million artillery ammunition plant there, with the state holding a 49 percent stake, prompting questions why this was not set up in Estonia instead.

Pevkur said that Rheinmetall had indeed made a similar offer to Estonia, but it did not seem suitable to the state.

"These offer conditions were such that a very large sum would have gone out of the Estonian taxpayer's pocket – first to acquire the stake, then the obligation to buy from them – and it would not have included a majority shareholding for Estonia, just as we now are also seeing in Latvia's case," Pevkur said.

Estonia opted instead to hold a public tender for an ammunition producer, a tender which Rheinmetall did not take part in. Negotiations from that tender have now reached the point where the first agreements should be signed in the coming weeks, and these offers do not impose such large obligations on the Estonian state, Pevkur said.

"Among the offers that are currently all tied to the defense industry park, there are large-caliber ammunition producers – 155 mm ammunition producers – as well as manufacturers of other types of ammunition, such as explosive charges. The production of various types of ammunition will certainly come to Estonia," Pevkur outlined.

Some opposition politicians have taken the Rheinmetall development as evidence of Estonia having fallen behind the other two Baltic states in being much more cautious.

"It is somewhat sad to see how Latvia and Lithuania, who are in the same situation as us, are able to make these decisions and push things so far that large manufacturers come, while we have not been able to," Kunnas said. He added that Estonia needs to act more aggressively in pursuing these kinds of industrial opportunities to avoid further lagging behind.

Riigikogu National Defence Committee member Leo Kunnas (Independent) told "Aktuaalne kaamera": "It is somewhat sad to see how Latvia and Lithuania, who are in the same situation as us, are able to make these decisions and push things so far that large manufacturers come, while we have not been able to."

Head of the Estonian Defense Industry Association Taavi Veskimägi disagreed, noting that the focus should be on cutting edge output, primarily for export.

"The goal of Estonia's defense industry policy is that we develop precisely that breakthrough and new tech in Estonia, products developed here, which create jobs with a much higher added value in Estonia. From the point of view of Estonia's economic development – especially in terms of jobs and economic added value – the Estonian defense industry can only be an export industry, as the Estonian Defense Forces (EDF) and the Estonian state itself are too small a client for these companies to be economically successful," Veskimägi said.

Latvia accepted Rheinmetall offer

After acceptance from the Latvian state, Rheinmetall, headquartered in Düsseldorf and the fifth-largest European arms maker, is to establish an artillery ammunition factory there. This will require an investment of €275 million, with production due to start in spring 2027. A framework agreement was signed in Hamburg, with the joint venture expected to be established later this year.

The deal has been dubbed "historic" and has attracted media attention worldwide.

The plant will produce 155 mm artillery shells, a mainstay of Ukraine's defense against the Russian invasion, for both Latvia's armed forces and for other partner countries. The facility is projected to reach an export volume of three billion euros annually, within a decade, and will create around 150 jobs plus associated benefits for the local economy.

It is not yet known where the plant will be situated.

Latvian Prime Minister Evika Siliņa said Rheinmetall was chosen as it is a European company and can help with the overall defense capability of the region.

"This will be an adaptable factory, and we can feel much safer," Siliņa said.

Rheinmetall CEO Armin Papperger meanwhile said "we are a European company – meaning we think in a European way, and if you think in a European way, then you must also invest on the European side."

Latvian Minister of Economics Viktors Valainis said the Rheinmetall factory will run on business principles without state budget funding, and after reviewing infrastructure and environmental needs with the company, Latvia has identified an ideal, as yet undisclosed location, he said.

The Latvian defense corporation is already building another factory in Iecava to produce large-caliber ammunition board member Ingrida Kirse said of that development: "This is a very experienced partner. We can be sure that the technology, equipment and necessary materials will be there... But the Germans built it in 14 months."

The production of Finnish Patria armored vehicles has gained momentum in the town of Valmiera. Latvia also co-leads the drone coalition together with the U.K.

An agreement for a Rheinmetall ammunition plant in Lithuania was agreed late last year.

The changed security situation has driven efforts to ramp up defense industries on both sides of the Atlantic, but capacity limits mean short-term demand mostly raises prices. In the U.S., reduced defense spending in the 1990s led to mergers like Lockheed-Martin and Northrop-Grumman.

--

Follow ERR News on Facebook and X and never miss an update!