The Baltic defense industry is no longer a footnote to Poland's or Germany's rearmament - it is its own fast-growing ecosystem, built by three small states responding directly to the country on their border. Roughly 200 companies now operate across Estonia, Latvia, and Lithuania, backed by billions in defense spending commitments and a handful of large private funding rounds. This is a landscape overview of where that industry stands today: how it compares to the rest of Europe, what is actually driving the spending, and who is building it.
Which European country has the biggest defence industry, and where does the Baltic region fit?
France leads Europe as the world's second-largest arms exporter for 2020–2024, with the UK, Germany, Italy, Spain, and Sweden forming the next tier of established producers. The Baltic states aren't in that tier, and framing them as if they were would misread the market entirely.
Instead, the same analysis places Poland, Hungary, the Czech Republic, Slovakia, Romania, and the Baltic states in a distinct group: countries building new defense-production capacity since Russia's invasion of Ukraine, rather than defending legacy industrial scale. A 2023 policy paper from the French Institute for International and Strategic Affairs put it plainly: all three Baltic states have limited defence industries which are mostly focused on dual-use products, with the main players being private small and medium-sized firms rather than large state-backed primes. Small, dual-use, and fast-growing describes this region more accurately than any comparison to France or Germany.
Who has the strongest military in the Baltics?
There isn't a single answer, because each Baltic state is compensating for a small population with a different structural choice. Latvia commits the largest share of GDP to defense - over 2.4% as of May 2024, with a plan to reach 3% by 2027 - while Estonia and Lithuania lean on long-standing conscription systems that give them deeper reserve pools relative to their size.
That structural gap matters for the industry, not just the militaries. Latvia only reinstated mandatory military service in 2023, which the FPRI analysis flags as an acute readiness constraint even as the country outspends its neighbors - a reminder that budget commitments and force readiness move on different timelines. Lithuania's population is roughly 2.1 million and Estonia's roughly 1.3 million, small enough that no single Baltic state will ever field a large standing force; the region's real military weight comes from NATO integration and allied brigades, not any one country acting alone.
Why is NATO-level defense spending rising so fast across the Baltic states?
All three Baltic states have committed to at least 5% of GDP for defense spending from 2026 onward, years ahead of NATO's own 2035 target - Estonia's defense minister has put his country's own figure at roughly 5.4% annually through 2029, while Lithuania is targeting 5–6% of GDP from 2026 to 2030. That commitment is a direct response to geography, not alliance pressure: all three share a land border with Russia, and Latvia and Lithuania also border Belarus.
Much of that spending is being financed through the EU's own defense-loan instrument rather than national budgets alone. Estonia, Latvia, and Lithuania are drawing roughly €12.2 billion combined from the EU's Security Action for Europe (SAFE) low-cost loan program - Lithuania €6.38 billion, Latvia €3.5 billion, and Estonia €2.34 billion - and Baltic officials are pushing for as much of that procurement as possible to be produced inside the region rather than bought off the shelf abroad.
The spending shows up as hardware, not just budget lines. Latvia is acquiring HIMARS rocket systems and upgrading its M109 Paladin artillery, Lithuania is fielding NASAMS air defense, and Estonia and Latvia have both moved on German IRIS-T systems. Procurement at this pace is also what is pulling foreign primes into the region directly, rather than just supplying it from abroad.
Is the Baltic Defence Line the same thing as the Baltic defense industry?
No, and conflating the two is an easy mistake given how often they appear in the same sentence. The Baltic Defence Line is a specific, state-built fortification project that Estonia, Latvia, and Lithuania agreed to build on 19 January 2024, running along each country's own border with Russia and, for Latvia and Lithuania, Belarus - Estonia alone plans 600 bunkers and 40 kilometers of anti-tank ditches, Latvia over 1,000 bunkers, and each country has committed €60 million annually to it.
The Baltic defense industry is the much broader thing: the manufacturers, dual-use tech companies, and investors building products and capacity across the region, only some of which touch the Defence Line project directly. Latvia completed its 280-kilometer section of border fencing in late 2025, and Estonia is targeting full completion by the end of 2027 - real, dated progress on one fortification project, not a proxy for the health of the wider industry.
Who's building the Baltic defense industry?
A mapped ecosystem of roughly 200 companies across Estonia, Latvia, and Lithuania, split almost evenly between firms building primarily for the armed forces and dual-use companies serving military and commercial customers alike. Estonia currently hosts the largest share of that ecosystem, with Lithuania and Latvia close behind.
This overview draws on direct, ongoing relationships across the region's policymakers, industry leaders, and decision-makers, built through previous government work rather than desk research alone - the kind of access that makes it possible to reach the right person on short notice rather than start a relationship from zero.
| Country | Mapped companies | Share of ecosystem |
|---|---|---|
| Estonia | 83 | 41.5% |
| Lithuania | 55 | 27.5% |
| Latvia | 47 | 23.5% |
| Foreign-headquartered, Baltic presence | 15 | 7.5% |
No single company represents the ecosystem better than Milrem Robotics, the Tallinn-based maker of the THeMIS unmanned ground vehicle. THeMIS is in service with 18 international partners, eight of them NATO members, and has supported Ukrainian forces since 2022; a new production line near Milrem's Tallinn headquarters is scaling output to more than 500 units a year. DefSecIntel, another Estonian firm, builds surveillance and counter-drone systems that feed directly into Rheinmetall's own SurveilSPIRE supply chain - a sign that Baltic companies increasingly plug into larger European primes rather than only serving their home governments.
A handful of other companies illustrate the range of what "building the Baltic defense industry" actually means in practice. Skeleton Technologies, an Estonian ultracapacitor maker, has raised roughly €392 million and is targeting a US listing in 2027. Origin Robotics, the Latvian drone manufacturer behind the BLAZE system, received a €4.5 million grant from the European Defence Fund. On the manufacturing side, Atlas Dynamics has delivered over 200 drones to Ukraine from its Riga factory, and Edge Autonomy - formerly UAV Factory - doubled its production capacity with a new Riga facility in 2025. Rheinmetall's own move into the region, a €180 million ammunition plant in Baisogala, Lithuania, shows the ecosystem now attracts large foreign primes as well as homegrown startups - and Latvia's own state-owned defense manufacturer is following the same logic, breaking ground in 2025 on a Riga plant for modular artillery propellant charges that will be the Baltic region's first, targeting production in the third quarter of 2026.
Latvia's own Federation of Security and Defence Industries counts 125 member companies - smaller than the full 200-company regional map, but a useful sign that this is an organized, established sector with its own trade body, not a handful of isolated pilot projects.