In the spring, it emerged that Turkish defense company ARCA would establish an ammunition factory in Põhja-Kiviõli, with its products to be used by the Estonian Defense Forces. ARCA Baltics Operations received its operating permit on October 20.

The operating permit will be followed by the signing of a property rights agreement, with the aim of completing the process before a notary by the end of this year. "For now, the company can continue with design work and other preparations," said Ines Edur, a spokesperson for the Ministry of Defense. The company can begin construction once the property rights agreement has been signed and a building permit obtained.

Production is scheduled to begin in 2028, with the Estonian government and the company working together to meet that target. The company currently has a contractual agreement granting it building rights. Under the agreement, the state will provide the company with a 141-hectare site in the Põhja-Kiviõli defense industry park and invest up to €10 million in building access roads and perimeter fencing, as well as establishing the electricity, gas and water connections needed for production.

Company to invest €300 million

ARCA Baltics Operations will produce large-caliber ammunition, including 155-millimeter artillery shells, at the Põhja-Kiviõli defense industry park. The company will invest €300 million in developing the infrastructure needed for production, including equipment and storage facilities. The ammunition manufacturer has pledged to create up to 1,000 new jobs in the region.

The process of issuing operating permits for the production of military ammunition is overseen by a commission established under the Weapons Act. The commission is chaired by the Consumer Protection and Technical Regulatory Authority (TTJA) and also includes representatives of the Estonian Internal Security Service (ISS/KAPO), the Police and Border Guard Board (PPA), the Estonian Defense Forces and the Rescue Board.

Corruption suspicions hang over CEO

ARCA's founder and CEO has previously been suspected of manipulating NATO contracts in exchange for money. Edur said that ARCA and ARCA Baltics Operations meet all the requirements of the competitive bidding process, including the requirement that the legal entity, its shareholders, beneficial owners, supervisory board members and management board members have no current criminal convictions.

"Security agencies were consulted about all companies participating in the competitive bidding process," Edur said. No disqualifying factors were identified in ARCA's case. The company also has no current criminal convictions.

Edur said that establishing defense industry parks in Estonia would strengthen the country's industrial and security capabilities. "Domestic production of large-caliber ammunition is an important capability that will increase competition in Estonia's ammunition market, making it possible to replenish ammunition stockpiles here more quickly, on better terms and at lower prices, while also improving the resilience of Estonia's defense capabilities in times of crisis," she added.

Manufacturers of explosives and military ammunition operating in Estonia must comply with all applicable Estonian regulations, including safety and security requirements, both when establishing production facilities and during operations. Compliance is monitored by the TTJA, PPA and other government agencies within their respective areas of responsibility.

The ammunition factory in Kiviõli will be built and subsequently operated by Arca Baltic Operations OÜ. According to the business register, the company's management board members are Ismail Terlemez and Nurseren Tol.

Confusion over representatives

Postimees reported in September that Turkish defense company ARCA Defence had been looking for a representative in Estonia as early as 2024. Swiss businessman Beat Eberle initially sought to represent ARCA in Estonia and established ARCA Baltics Operations OÜ in October 2024. However, the company later began receiving advice from ESC OÜ, a company owned by Jaanus Rahumägi, a friend and fellow Reform Party member of former Defense Minister Hanno Pevkur. Rahumägi has said that his company began advising ARCA in April 2025 and that the Turkish company initiated the contact.

Rahumägi has denied any involvement in ammunition purchases or procurement processes and insisted that he has neither discussed ARCA's procurement matters with Pevkur nor pressured him. According to Rahumägi, ESC's role is limited to advising ARCA on the competitive bidding process for the defense industry park.

According to the business register, ARCA Baltics Operations OÜ is registered at Mõisa tänav 4 in Tallinn. Several companies linked to Jaanus Rahumägi are also registered at the same address. Rahumägi's company ESC OÜ also lists Mõisa tänav 4 as its business address. The Al Mare office building is located at that address.

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