Yves here. As tensions rise over Russia’s ambitions in Europe, one might expect EU leaders to prioritize the effective allocation of military spending, particularly amidst tight budgets across member states. However, this assumption may be misguided. According to John Helmer, Estonia—eager to enhance its reputation as a military heavyweight within NATO, at least in terms of defense spending relative to GDP—appears to be embracing a level of graft in military expenditures that rivals Ukraine’s notorious corruption.
Unlike Ukraine, which tries to veil its corrupt practices, a significant portion of Estonia’s military spending may be transparently siphoned off. Reports indicate that intermediaries handling funds intended for Ukraine stand to profit from hefty 10% to 15% commissions simply for having the right connections. Helmer elaborates on this troubling situation, referring to a recently leaked summary of a sobering parliamentary report:
The 240-page document detailing Estonia’s mismanagement of military funds was compiled by a multi-party parliamentary committee and leaked in an 11-page summary submitted to the Riigikogu, Estonia’s parliament, last week. The documents have since circulated in the Estonian media but have not been formally released by parliament.
Such blatant financial misconduct is likely to provoke voter dissatisfaction, particularly as revelations regarding the misappropriation of funds sent to Ukraine for both arms and general support begin to emerge. For example, a CBS documentary previously reported that up to 30% of the funding for weapons ended up being misappropriated, leading to CBS retracting the revelation. As awareness grows regarding the rampant corruption in Ukraine, the blame-shifting has begun, with political actors eager to absolve themselves of responsibility. In this context, consider the latest scandal detailed in this overview by Politico. However, $100 million is a drop in the ocean compared to the troves of mismanaged funds. Nonetheless:
Ukrainian anti-corruption agencies announced Monday that several associates of President Zelenskyy are reportedly involved in a scheme to defraud nearly $100 million from Ukraine’s energy sector.
This scandal coincides with severe blackouts caused by Russian strikes, highlighting the state’s claims that it has spent millions to defend energy infrastructure against drone and missile attacks.
The investigation, dubbed “Operation Midas,” spanned 15 months and involved extensive wiretapping, leading to the seizure of numerous cash-filled bags.
Authorities apprehended five of the seven alleged participants, who are accused of securing kickbacks ranging from 10-15% by manipulating contracts with Energoatom, Ukraine’s state nuclear energy entity. Investigators claim the network laundered approximately $100 million through a clandestine office in Kyiv.
Ukraine’s National Anti-Corruption Bureau (NABU) and the Special Anti-Corruption Prosecutor’s Office (SAP) dismantled a criminal organization consisting of serving and former energy officials, prominent businesspeople, and ministry leaders.
Last summer, Zelenskyy’s office sought to limit the autonomy of NABU and SAP, positioning them under the purview of the politically appointed prosecutor general. This move sparked the first significant anti-government protests since Russia’s full-scale invasion in 2022.
In the face of EU pressure, Zelenskyy recently reversed course, advocating for maximum transparency and demanding the resignation of current energy and justice ministers implicated in the NABU investigations.
This allows speculation that Zelenskyy may have permitted this lower-profile investigation to suggest he is taking a stand against corruption. However, substantial efforts to address the full extent of the corruption may be a long way off.
By John Helmer, the longest continuously serving foreign correspondent in Russia and the only western journalist to manage an independent bureau devoid of national or commercial affiliations. He has also served as a political science professor and advisor to heads of government in Greece, the United States, and Asia. Helmer is the first and only member of a US presidential administration (Jimmy Carter) to establish himself in Russia. Originally published at Dances with Bears
Recent political turmoil in Estonia can be traced back to a leaked report which exposed the diversion of defense funds. This is not a mere coincidence; it is a direct result of the Estonian leaders’ claims that they lead NATO in terms of the military proportion of their Gross Domestic Product (GDP), rising from 3.4% to 5.4%.
This increase was formally enacted last April, following the approval of a €2.8 billion augmented defense funding bill over four years to meet NATO requirements as set by former President Donald Trump. This move elevates Estonia from the 19th position globally in terms of defense/GDP ratio, positioning it closely behind Poland and just one rank below the US, aiming to lead among NATO member states.
“As you know, I want to acknowledge your leadership for meeting the 5% defense spending target, not merely years down the line, but effectively in all of your countries by 2026,” U.S. Defense Secretary Peter Hegseth stated during a Pentagon meeting with Estonian Defense Minister Hanno Pevkur and his Latvian and Lithuanian counterparts on July 25. “This underscores your commitment to the security of the Alliance and sets a clear example for others to follow.”
Pevkur responded, “This meeting symbolizes the strong partnership between the Baltic States and the United States. We support one another in times of need, truly demonstrating what brotherhood in arms means.”
In Estonian, that phrase translates to “brother’s hands in each other’s pockets.”
Official announcements last month indicated that Pevkur has agreed to invest $4.73 billion in new US HIMARS artillery systems and ammunition. Over €10 billion ($12 billion) is now allocated for defense spending during the four-year period from 2026 to 2029, with media reports revealing that procurement commands 37% of the budget, ammunition 25%, personnel costs 14%, operational expenses 13%, intelligence and early warning 3%, civic mobilization for the Defense League 3%, and infrastructure projects 5%.
More than half of this amount is expected to flow directly into the hands of the US military-industrial complex, while a significant portion—10% to 15%—is projected to return to Estonian intermediaries as commissions. US and European military companies are also being encouraged to invest in new arms production and security technology in Estonia itself, including plans to invest €50 million in defense industry innovation and establish a Future Capabilities and Innovation Command and a new defense park in Pärnu County.
Seen in this light, this represents the most significant mismanagement in Estonia since it looked to Adolf Hitler and German military investments from 1941 to 1944.
ESTONIA’S DEFENCE SPENDING AS A PROPORTION OF GDP, 2024-25
Source: https://x.com/BudrysKestutis/status/1962505391972974801
“We have made a historic decision for Estonian national defense. We have never allocated so much additional funding in one year to national defense,” stated Hanno Pevkur, Estonian Defence Minister. “Next year, defense spending will reach approximately 5.4% of GDP, exceeding 2% in just one year, and this level will be maintained for a considerable time.”
Pevkur and Hegseth at the Pentagon on July 25, 2025, with Latvian Defense Minister Andris Sprūds (left) and Lithuanian Defense Minister Dovilė Šakalienė (right).
According to the leaked report, Estonia’s military command has ceded control over the new spending to two civilian agencies, the State Defense Investment Centre (RKIK, English acronym ECDI) and the Defense Resources Agency (KRA), both staffed by political appointees. These agencies are suspected of manipulating procurement contract prices, collecting commissions, fabricating deliveries, falsifying inventory records, and laundering proceeds into offshore accounts that benefit government officials.
Source: https://www.kaitseinvesteeringud.ee/en/
Source: https://kra.ee/en/
The newly leaked report was compiled by a group of MPs—including Leo Kunnas (Independent), Alar Laneman (Reform Party), Neeme Väli (Isamaa), and Anti Poolamets (EKRE)—led by Meelis Kiili (Reform), a former major general of the Defense League. Initial member Peeter Tali (Eesti 200) resigned amidst disputes over the report’s content.
In a press interview, Kiili responded to critiques that his report unjustly placed blame on former military leaders for transferring control of arms planning to inexperienced civilians, thus compromising Estonia’s defense strategy.
“Question: The shorter, 11-page summary of the report presents a very serious assessment. I’ll quote: ‘In the working group’s opinion, the Estonian state as a whole is unprepared for a potential war.’ Could you explain the reasoning behind that assessment? ”
“Answer: Local governments and society must be engaged. We cannot assign strategic responsibilities to subordinate structures. Expecting the Rescue Board to handle a national crisis is unrealistic. Our conclusions emphasize the necessity for structural fixes, a clear delegation of authority, and ensuring competent oversight at the political level. As straightforward as that sounds, our assessment reflects that we are preparing for crises using peacetime methods and are unaware of what crisis truly entails due to the absence of firsthand experience. Learning from Ukraine offers clear insights—throughout this report’s drafting process, we consistently referenced Russia’s military doctrine and developments in Ukraine. There seems to be an unsettling tendency to dismiss these realities, similar to how, on February 22, 2022, President Zelensky stated there would be no war. It’s crucial to communicate honestly and openly.”
Kiili’s report unambiguously acknowledges that Estonia’s military focus is on countering Russia. Notably, it avoids mentioning potentially inflated US arms contracts or allegations of corruption and money laundering within official ranks. The Estonian press and parliament have stifled public discourse on these local issues, while the corruption associated with how the Zelensky regime handles defense contracts is widely covered.
Whenever the Russian media addresses this Estonian debacle, government officials lash out, dismissing allegations against Pevkur’s management of the defense budget—including investigations conducted by the National Audit Office— as disinformation and Kremlin propaganda.
In September, the state auditor released a press statement revealing systemic issues in contract management by defense agencies, asserting that immediate action must be taken against the backdrop of escalating defense budgets. Auditors accused officials of withholding contract details and financial data, thereby contributing to systemic failures in fund utilization that warrant urgent attention from the Ministry of Defence. The audit notably questioned “the accuracy of the inventory balance of the Ministry of Defence, totaling €723.9 million.”
Source: https://www.publicnow.com/view/4B2B371B5ED72366E906BB3846FD0CFC01E72B59?1756849697
The National Audit Office was also sharply critical of the two military procurement agencies, RKIK and KRA, asserting: “The audit indicated that the Estonian Centre for Defence Investments and the Defence Resources Agency struggle with contract management and monitoring the delivery of goods.” They highlighted instances of erroneous payments totaling $79.1 million and flaws in defense equipment purchase documentation, making it impossible to verify compliance with contractual obligations.
Intra-party politics, interpersonal rivalries, and egos have further complicated matters, leading to confusion in reporting. “The overarching issue with this report [Kiili’s report] is that valuable recommendations risk being overshadowed by a disinformation campaign,” media reports state.
Recently, an unusual perspective on the Estonian debacle emerged from a Moscow security analysis outlet, Vzglyad. The author, Stanislav Leshchenko, claimed that Trump’s push for a 5% target has yielded a “feeding trough” for individuals close to the ruling party, which is echoed by the Estonian opposition.
Source: https://vz.ru/world/2025/11/13/1373432.htmlThe translation which follows is verbatim. Illustrations have been added for English readers.
November 13, 2025
The “Russian threat” has turned out to be the reason for a big cut in
Estonia
By Stanislav Leshchenko
The massive financial allocations purportedly directed at “preparing to counter Russian aggression” have seemingly become a source of profit for those close to the ruling party, or so claims the Estonian opposition, referencing supporting evidence from parliamentary findings. What exactly came to light?
Estonia has been rapidly escalating its military expenses, to the extent of considering substantial loans. Recently, members of the parliamentary commission on state defense released a report detailing the misallocation of these funds.
According to this report, essential managerial functions, such as personnel management and troop logistics, were stripped from the Commander of the Defense Forces and delegated to the State Defense Investment Centre and the Defense Resources Agency, which operate outside the military chain of command. This fragmentation in command has hampered effective army management, with the report labeling it as a consequence of attempting to impose a peacetime management style in times of crisis and conflict. The report places accountability on former military commanders, including Riho Terras and Martin Herem.
Left, Lieutenant General Riho Terras: “Estonia has a clear plan for handling any ‘little green men’—the undercover Russian operatives that emerged during the early stages of the Ukraine crisis—according to the country's chief of defense: they will be shot.” https://www.ft.com/content/03c5ebde-f95a-11e4-ae65-00144feab7de
Right, Major General Martin Herem: “Estonia can no longer be overrun in mere days; although some areas might be taken, it raises the question of whether the adversary would pursue further, facing an armed force of 21,000.” https://news.err.ee/652005/estonia-can-no-longer-be-taken-within-just-days-says-brigadier-general
The full report was expected to be released on November 6 but was never published due to overwhelming backlash from limited press previews. Kalev Stoicescu, leader of the parliamentary defense commission, remarked that the report “requires considerable revisions,” asserting that securing the nation must take precedence over social or ancillary matters. Nevertheless, primary author, retired General Meelis Kiili, remains steadfast, claiming that logistics and rear support for the Estonian military do not satisfy its genuine requirements. He hints that the report will be made public again, underscoring its expertise-driven foundations.
Both Terras and Herem have countered the criticisms, asserting that the Defense Resources Department enables battalion and brigade commanders to avoid getting bogged down by trivial matters like procurements, logistics, and maintenance. They claim that previous critics of the decision-making process had no reservations at the time. Current Defense Minister Hanno Pevkur also maintains that the governance of Estonia is well-regulated during both wartime and peacetime.
Estonia’s government was elected in 2023, with the Reform Party, led by Kaja Kallas, winning 31.2% of the vote; EKRE coming in second with 16.1% and the Centre Party third with 15.3%. https://www.politico.eu/europe-poll-of-polls/estonia/ Since the elections, support for the coalition government comprising Reform, the Social Democratic Party, and Eesti 200 has plummeted. https://news.err.ee/1609848678/norstat-poll-reform-party-rating-hits-new-low-point In response to declining domestic approval, Kallas resigned mid-2024 to take up the role of EU’s foreign minister.
In 2017, Estonia established the State Center for Defense Investments (RKIK), tasked with organizing and executing military tenders valued at €10,000 and above. The Defense Resources Agency was founded 15 years ago and has faced scrutiny for inefficiency: in its early years, it was criticized for spending €30,000 annually on unnecessary conscript tests.
Estonia continues to acquire various weapons, including Finnish SAKO TRG M10 rifles and Israeli-Singaporean Blue Spear 5G anti-ship missiles. All of these procurements navigate through RKIK, which often raises alarms regarding the legitimacy of costs and the quality of the products procured. Recently, it was discovered that “high-precision” R20 submachine guns purchased six years ago for millions of euros needed extensive warranty repairs.
Moreover, in September, the State Audit Office noted numerous issues within the Ministry of Defense during its auditing process, specifically concerning management, control of contracts, and verifying compliance with and receipt of delivered goods. They warned that “as defense spending sharply rises, so too do the risks, some already realized.”
The auditors found themselves unable to verify some areas of the Ministry’s operations due to insufficient information being provided. They were unable even to ascertain the total number of contracts, their expiry dates, or the aggregate financial commitments made. “The issues identified extend beyond mere accounting shortcomings; the audit illuminated significant operational disarray with financial impacts. The discrepancies linking contracts, advance payments, and goods, along with other noted deficiencies, highlight a systematic problem that warrants urgent attention from the Ministry of Defense,” remarked Janar Holm, head of the National Audit Office.
He noted the RKIK’s handling of public funds exhibits astonishing carelessness. In March 2024, the State Defense Investment Center erroneously paid one supplier $79.1 million and another $8.7 million later that same year. While the supplier returned $47.8 million, $40 million remained in a retained advance payment account meant for future transactions under the same contract; RKIK saw no reason to recover the overpayment, claiming it was too complicated, assuming purchases would eventually balance that amount.
Another contractor’s account reflected an accumulated prepayment balance of €9.6 million since 2018, yet despite placing additional orders, RKIK did not utilize this accumulated balance for payments. Similarly, discrepancies due to paperwork obscured the verification of contracts related to military goods, causing delays of several years in property registration with the Army. In April 2025, purchases amounting to €45.8 million from three suppliers were backdated to 2024 expenses.
Overall, numerous such discrepancies have accumulated.
“Erroneous payments to contractors, which at best reach tens of millions of euros, or an advance payment lingering for eight years are among the most glaring examples. The chaos surrounding contract linkages, advance payments, and goods indicates a systematic failure to use allocated funds,” warned Holm. He believes the Defense Minister along with RKIK’s general director and the Army’s command should “urgently rectify severe issues regarding property accounting, inventory management, and various operational processes.”
In early June, Magnus-Waldemar Saar, who served as CEO of RKIK, announced his retirement. Estonian media has humorously speculated about the motivations behind his exit—whether it was due to burnout or the impending audit—but no replacement has since been appointed. Defense Minister Hanno Pevkur begrudgingly acknowledged that the management of military asset accounts needed refinement.
Left. Anu Rannaveski was appointed to lead the Defense Resources Agency (KRA) in 2022; the organization's website does not indicate its leadership. Center, Janar Holm, appointed head of the National Audit Office since 2018. Right, Magnus-Valdemar Saar awarded the Class II Service Cross of the Defense Ministry on July 17, 2025, in recognition of his “systematic and transparent approach to national defense procurement” before resigning after four years of service. https://www.kaitseinvesteeringud.ee/en/minister-of-defence-awards-service-cross-to-outgoing-rkik-director-magnus-valdemar-saar/
Former Commander-in-Chief Riho Terras (now a Member of the European Parliament) has voiced his support for the National Audit Office, asserting that “unacceptable chaos” characterizes the Ministry of Defense’s operations. Terras believes that Minister Pevkur observes the conditions in the ministry “from the outside, with cold indifference.”
“In a climate where Prime Minister Kristen Michal insists that all revenue from the tax hike is intended solely for bolstering defense spending, such disarray is intolerable! It undermines societal stability and betrays taxpayers’ trust. How can we be certain our funds are being utilized as promised? We can’t anymore. The revelation is that millions of euros are being inadvertently paid out,” expressed Terras, demanding accountability from Pevkur for the “disarray” and calling for his resignation.
The situational response from the opposition EKRE party has been particularly forthright. They contend that the establishment of RKIK—an entity that operates independently of the military commander’s control—was intended to streamline procurement as a “feeding trough.” EKRE founder Mart Helme accuses Prime Minister Kristen Michal and his Reform Party of creating a perpetual resource thanks to their rhetoric surrounding the “Russian threat.” According to Helme, the immense funds allocated for defense converge into the hands of a select few close to the ruling party.
Last spring, EKRE remarked: “We observe massive funds funneled into the so-called defense industry, which appears as another corrupt project orchestrated by the Reform Party. Transferring former high-ranking officials and military leaders linked to the Reform Party into defense firms—receiving hundreds of millions—does not enhance Estonia’s defense capacity; it merely reallocates limited resources to a small circle, yielding negligible outcomes.”
They have specifically criticized Martin Herem, the former head of the Estonian Defense Forces, who secured a lucrative position with Frankenburg Technologies after leaving his post last year. This company specializes in air defense systems and has welcomed a number of former high-ranking military officials and Ministry of Defense personnel into its leadership, including former Chancellor of the Ministry of Defense Kusti Salm and retired Major General Veiko-Vello Palm. Despite posting a loss of €1.1 million last year, Frankenburg Technologies is still regarded as a significant state partner. The opposition views Frankenburg, much like RKIK, as a conduit for redirecting Estonian taxpayer funds into a narrow circle of “esteemed individuals.”
