"In the past, the defense industry generated annual sales of around €200 million, approximately half of which was from exports. The main customers are still outside Estonia," said Tarmo Ränisoo, executive manager of the Estonian Defense Industry Association (EDIA).

Although last year's total sales revenue has not yet been calculated, Ränisoo said, that due to increased demand, annual (financial) targets had already been reached in the first half of the year. High-caliber artillery shells being one example of why.

"In Europe today, according to one statistic, the capacity exists to produce 300,000 shells a year of the caliber being widely used in Ukraine today. Ukraine is now using 5,000-6,000 a day, (which is around) 40,000 a week," said Ränisoo.

However, currently, no artillery shells are produced in Estonia.

"The situation in the market was such, that the manufacturing of traditional products was mostly guaranteed by large companies. Consequently, new technologies were left as possible ways for new companies to break into the market," Ränisoo explained.

In other words, it is easier to sell software or drones abroad, however when it comes to munitions production, it is very difficult for a small Estonian company to keep up with larger manufacturers,  such as Rheinmetall in Germany. However, now that demand has increased so much, that may no longer be the case.

"I've just come from a meeting with an Estonian company, which is very clearly looking at producing ammunition locally. There are still some details that need to be fleshed out. Part of the capability is already there, and another part is in the process of being created," Ränisoo said.

However, Estonia is probably not capable of having as large a defense industry as countries like Israel or South Korea. These countries have to spend a lot on national defense because of the constant threat, but domestic production makes it cheaper overall (for them). Poland, with its growing defense budget, is heading in the same direction. Along with South Korea, the Poles are now starting to produce modern tanks, and will most likely be hoping to sell them in Europe.

So, the trend seems to be, that arms production in Europe is moving eastwards. However, Ränisoo says, that Estonia not to get too carried away. While Poland has a great deal of experience in producing heavy equipment, that is not the case in Estonia.

"Let's be realistic about how big the factories we build here (will be). Are we going to build factories with a capacity of 4,000-5,000 people? Do we have the investment funds for that? Do we have the orders for that? Do we even have the competence to do that?" Ränisoo asked.

"I think, that for companies today, it's more commercially viable to sell to the military-industrial complex a certain amount of that end product, which is high quality and technologically advanced. It is that, which can keep (Estonian) companies in an above average position in the value chain," Ränisoo said.

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