Estonia issues historic munitions procurement to kick-start EU defense industry

CV90 main cannon firing.
CV90 main cannon firing. Source: Kristo Sepp/

The Estonian state is assessing capabilities of European munitions manufacturers in its biggest procurement to date, at €280 million. While production lines are currently experiencing wait lines of up to two years, the state hopes for faster delivery times than this, while all will in any case be revealed in less than a month.

Preparations for the procurement, which focuses primarily on artillery shells and state-of-the art anti-armor projectiles, have been on-going all year. As early as last winter, the Center for Defense Investments (RKK) announced that within the following seven years, Estonia plans to acquire large-caliber ammunition to a value of half a billion euros.

The state has offered framework contracts to all bidders who expressed a desire to take part in the tender process.

A maximum of €110 million from this half-billion-euro framework contract is intended to go towards arming the Combat Vehicle 90 (CV90) infantry fighting vehicles' main autocannon (pictured).

Up to €20 million will be spent on Type 69 RPG ammunition, while the largest sum, €370 million, will go on 155mm artillery rounds.

As of October this year, a framework agreement was signed by 12 companies from seven different countries.

Ramil Lipp, manager of the RKK's armaments category, said: "The concept behind​​the framework contract, signed with several suppliers, is that we can obtain the best price at the market, at any point in time, and with the best delivery times."

Lipp said that more and more countries are getting behind schemes like this "If we were stuck with the one framework agreement partner, we would essentially have no choice other than to accept what this one partner can provide us with.

Minister Pevkur: €280 million will be utilized

These agreements were also put to the test right away. Last Tuesday, while EU defense ministers were giving an account to each other as to why they could not fulfill the pledge of providing one million shells to Ukraine, the Estonian Ministry of Defense announced a mini-tender, for 155mm artillery shells.

The term "mini" is more a legal nuance than anything else, in this case. "Estonia is currently the biggest ammunition purchaser in Europe," Defense Minister Hanno Pevkur (Reform) said. "Finland made purchases for €100 million, Norway likely for a few hundred million. The Estonian mini-tender, at nearly €280 million, will surely exert a very, very major impact on the European munitions market," Pevkur said.

This €280 million represents the estimated cost of the competitive tender, and includes VAT as well as a feature by which the state can subsequently boost the quantity of munitions initially set out in the tender, by 50 percent. However, even a more conservative calculation also reaches up to €150 million.

Pevkur added that: "We really don't know how the market has reacted to the orders of the past few months. The fact is that shells and their various components have become significantly costlier.

The minister said ammunition actual prices will be revealed only after the tenders are opened.

Appreciation of ammunition prices may sometimes be overstated

Admiral Rob Bauer, Chair of the NATO Military Committee, recently noted that prior to the full-scale war in Ukraine starting, a single 155mm shell cost just over US$2,000.

Now it costs four times that.

Ramil Lipp says that the matter is more multifaceted than this fact might suggest, however. First of all, the commonest high explosive projectiles differ from each other quite widely. An older shell can reach a range of only around 18 kilometers, whereas a newer, and thus costlier one, can be fired 24 kilometers or even 30 kilometers behind.

There are munitions out there with an even further extended range, from which an enemy has no respite even at a range of 40 kilometers. A small rocket engine (rocket-assisted projectiles) or, in some cases, a gas generator, which compensates for negative pressure behind the projectile, aids the range of such types of shells.

"A 24- or 18-kilometer ranged shell could have cost a few thousand euros two years ago. But according to my latest info, its price has not increased fourfold, to date," Lipp said. "Moreover, two years ago, an extended-range, or 30-kilometer shell, cost €3,500 to €4,500."

Estonia hopes to obtain three types of ammunition with these "mini" procurement rounds. First and foremost, conventional projectiles with a range of 30 kilometers – the maximum effective range the K9 Thunder SP howitzers purchased from South Korea, when using conventional ammunition.

"We want to make the most of this weapon system," Lipp said of the K9s, known in Estonian as "Kõu" (ie. Thunder). "Shorter ranges, up to ten kilometers, can also be covered via mortar fire. For this, you don't have to spend on costlier ammunition and/or a more expensive weapon system."

K9 Thunder self-propelled howitzer in Estonian service (photo is illustrative). Source:

Lipp added that, as far as he knows, the price of a 30-kilometer shell has not risen to the €8,000 Bauer cited. "I have knowledge obtained from the market today that their price range is around €4,000-€5,000."

The guiding principle with both systems is similar. At an altitude of a couple of hundred meters above a target, two smaller launchers are released from the shell complex, which gradually move ground-wards, relying on winglets or a parachute. They simultaneously search for targets over an area of tens of thousands of square meters, and loosing off an armor-piercing explosive charge towards a target.

Estonia purchases more than 25,000 projectile sets in one go

The second mini-tender is dedicated to slightly costlier long-range projectiles. Estonia initially plans to buy a total of two types of ammunition, totaling about 25,000 rounds.

This constitutes all the components of a shell, ie. projectile, propellant casing etc.

As for the third mini-tender, the state will be sourcing anti-tank shells. "This round is limited to 500 projectiles," Lipp said, noting that anti-tank shells also cost many times more.

By way of example, German-made SMArt 155 guided shells have been valued at €70,000-€80,000 apiece. Meanwhile BONUS, a joint effort involving Swedish and French companies, was recently reported by The Economist at costing €40,000 per shell.

More than a quarter of the points go to the most rapid bidder

"We have three different mini-procurements open, and all three could end up being awarded to different firms," Lipp said.

In concluding framework contracts with the firms, the RKK also left itself quite a lot of leeway to shape the terms of future mini-tenders.

When evaluating bids, the percentage regarding cost may vary between 50 and 90 percent, while the percentage with delivery time may vary between eight and 40 percent. The so-called green ammunition component can also range from two to 10 percent.

"It is known that ammunition itself can contain some harmful substances. Through this evaluation criterion, we direct the bidders to consider that further," Lipp added.

Much flexibility was left in the framework agreements, on the understanding that they will remain valid for the next seven years.

Lipp added that: "At some point there may be a need for very rapid delivery. In this case, we definitely rate the delivery time higher in terms of priorities. And if we can see that our primary needs are covered and there is time, we definitely consider the price component more.

The CV90. Source: Kristo Sepp/

Within the mini-procurement rounds and their terms as announced a few weeks ago, the tender winners are determined by price (70 percent of the total), delivery speed (28 percent) and the avoidance of environmentally harmful substances (2 percent).

Estonia hopes to bypass wait lines of up to two years

Even harder to predict than tender price is delivery time, and this can be critical.

Minister Pevkur said: "I really hope that the deadlines will be quite fast," though talking to munitions manufacturers gives less cause for optimism.

Ramil Lipp said: "The overarching message is that the bidders are talking about production lines are planned as of today for the next 18 months to two years; that is, the orders are set and so nothing is likely to be obtainable in the next couple of years.

At the same time, Lipp believes that there is no major cause for concern. For one thing, Estonia's munitions stockpiles are not empty, and everything needed to be acquired now should come as a replenishment to those current stocks. Second, according to Lipp, relying on the mini-tenders' conditions is worth doing.

Lipp noted that the points awarded on the delivery time are distributed on a piecemeal basis. For example, the first 5,000 shells to arrive in-country can be score 10 points, the next 5,000 shells bring seven points, and the following batches fewer points than that.

Playing bidders off against each other can also work.

"If you make the market players compete with each other, it may transpire that they review the existing contracts, perhaps they will amend something here and there, and pick up some intermediate quantity from somewhere, then offer it to us instead," Lipp said. "The beauty of the game in this mini-tender process lies in the fact that, no matter what the market participants announce via public sources, there can always be some kind of variation, one which can be carried out faster."

European ammunition supplies gradually being stockpiled

Defense Minister Pevkur meanwhile believes that the Estonian procurement rounds signal to the market to start faster rates of production. "This is a real example of how the European defense industry can be started faster, because it is a real order. We need new money to get the industry going," Pevkur noted.

Considering that under the conditions of mini-competitions, Estonia reserves the opportunity to increase orders by 50 percent, the country plans to secure around 37,000 shells.

According to Pevkur, European countries must help Ukraine with missiles and restore the stocks here. But even this is not enough, because NATO's new defense plans require larger amounts of ammunition than previously planned.

Last Wednesday, at the meeting with other EU defense ministers in Brussels, Pevkur stated when all is said and done, Europe should produce three million projectiles a year.

"When you consider the fact that at present, Europe can produce 500,000 to 700,000 rounds per year according to various estimates, while in the first quarter of next year this figure may reach a million projectiles, in fact we should step things up two or three times from there, in order to meet Ukraine's needs too, as well as covering Europe's shortages."

Pevkur: Rheinmetall is searching for cooperation partners, states where it might construct production plants

Meanwhile some arms producers have said they want to enter into long-term contracts with sovereign nations, to ensure that production lines that get set up quickly do not later grind to a halt should international tensions ease. At the same time, other guarantees are also sought. Minister Pevkur cited German firm Rheinmetall, one of Europe's largest producers, as an example.

"So far as I know, they have been negotiating with some European countries along the lines of investing half of the cost into the plant and then asking that state for the other half. We are already seeing that countries are going into ammunition production," he said.

Pevkur said he believes that Estonia will take a different route, however. The minister said munitions producers also want the state's help not only in funding but also in finding a suitable location, with the planning process, and with processing permits.

"What we are doing now takes the form of a defense industries business park," he said. "If we find a way to carry out this plan, I believe that various munitions producers will also come to Estonia."

Ramil Lipp meanwhile said that boosting the production capacity at plants is not the only challenge facing munitions producers. Specifically, demand for the materials and details necessary for the production of ammunition has also risen, and worldwide. "This supply chain can be traced down quite a few steps. It's not simply a question of who assembles the projectiles," he added.


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Editor: Andrew Whyte, Merili Nael

Source: ERR Radio News, reporter Madis Hindre.

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