The Baltic countries should capitalise on their strong relationship with Washington to transition from being mainly buyers of US defence technology to suppliers and innovation partners, say the heads of defence industry associations in the three countries. 

Lithuania, Latvia and Estonia have all massively ramped up defence spending in recent years, and should now make sure that a significant amount of that goes towards scaling up local capabilities and helping companies sell products on a global scale. 

“For Lithuania's defence industry, the priority is to move beyond simply purchasing defence equipment towards mutually beneficial industrial cooperation, including component manufacturing, maintenance, systems integration, joint production and technology development,” said Vaidas Sabaliauskas, director of the Lithuanian Defence and Security Industries Association. 

“Achieving this requires not only political agreements but also concrete commercial projects in which Lithuanian companies can offer competitive products and services,” he added. 

The US is a key partner as it is one of the biggest global spenders on defence technology. However, it is not an easy market to break into. 

“The wins for Estonian companies in the US have so far been small,” said Kalev Koidumäe, chief executive of the Estonian Defence and Aerospace Industry Association. 

There are several obstacles, such as the America first preference and the need to work within the International Traffic in Arms Regulations, which control the export, transfer or sharing of certain defence-related products. European hopefuls also need to break into the circle of US companies that traditionally win many of the government’s defence-related contracts. 

The usual way into the US market is through either partnering with US companies or working with them as sub-contractors, Koidumäe said.

Artis Pabriks, chief executive of Latvia’s Military Technology, Drones and Robotics Association, also said the Baltic countries need to transition their relationship with the US defence sector from being principally focused on procuring equipment and systems to a more mutually beneficial partnership. This would involve more joint projects, investments into the local ecosystem, as well as a greater push to sell Baltic tech abroad.

“It's important, as a small country, to preserve and increase our access to export markets, because if you have a growing industry, this industry cannot rely only on the national market,” Pabriks said. Better cooperation with Europe and the US was therefore vital. 

Šarūnas Genys, head of the manufacturing sector team at Invest Lithuania, said the next step for the country is to move the relationship with the US “beyond procurement towards more production, technology cooperation and integration of Lithuanian suppliers.” 

He cited recent agreements and memoranda with US defence companies Lockheed Martin and Northrop Grumman as examples of more mutual forms of cooperation.

Bolstering domestic defence tech

Both Estonia and Lithuania have pushed defence spending up to over 5% of GDP this year, while Latvia is just shy of this figure, which NATO has set as a target for its members to reach by 2035. Most European countries spend between 2% and 3% of GDP on defence, while the US spends over 3%. 

This has helped create a relatively strong relationship between the Baltic countries and the US, which has long called for EU countries to increase defence spending. 

“Estonia has always taken its commitment to NATO and our allies very seriously, which has led to strong defence and security cooperation between Estonia and the US,” Koidumäe said. 

But being in the US’ good books only goes so far. “Political openness does not automatically translate into industrial cooperation.” Sabaliauskas said. “Even projects between close allies are subject to US technology export control requirements.”

There is awareness in the Baltic countries of the need to use bigger defence budgets to fund domestic capabilities and scale-up local production. 

Latvia’s 2026 defence budget comes with the goal of ensuring 30% of major procurements remain within the Latvian economy. This is alongside €25.9 million going towards the development of the defence industry, innovation, and support for start-ups and a NATO Defence Innovation Accelerator for the North Atlantic (Diana) accelerator centre. 

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Estonia, meanwhile, has earmarked €38.2 million of its €2.4 billion annual defence budget to establish a defence industrial park, as well as €3.8 million to develop and test new products and €2 million for R&D activities. The country also has a €100 million defence tech fund, and has put €5 million on the table to support defence innovation, offering grants of up to €500,000. 

It is also home to NATO Diana’s only European regional hub, reporting to head office in London, with an accelerator programme that is just beginning its third year of operation.

Lithuania too has introduced new financing instruments, investment incentives and initiatives aimed at attracting international manufacturers.

While significant, spending on domestic capabilities still pales in comparison to the amount the Baltic countries are putting into purchasing US equipment, systems and munitions. 

Estonia, for example, is reported to have signed an agreement last year for the purchase of US launchers, missiles and rockets valued at over €4 billion. Latvia’s armed forces, meanwhile, have 46 active agreements with the US worth hundreds of millions of euros. And Lithuania has spent around €2 billion on US equipment and weapons systems in the past three years

“The main challenge is to ensure that increasing defence budgets translate not only into equipment purchases but also into long-term domestic industrial capabilities,” Sabaliauskas said.

“Businesses need clearer, long-term planning of military requirements, more predictable orders, faster procurement and testing procedures, and better access to financing for expanding production capacity,” he added. 

For Pabriks, Latvia needs to seize the moment and back its thriving defence tech sector, with exports to markets such as the US a pivotal part of the solution. “Right now, we are definitely punching above our weight,” he said. “How long it will be preserved is difficult to say because, of course, it's not easy for a small country to compete with countries with a long-established defence sector and hundreds of millions in investments.”

Continued state support for the sector is crucial. “It is also important to continue to build partnerships with other, global companies,” he said. 

Growing US awareness

One example of this type of partnership is US defence company Redwire’s acquisition of Latvia’s Edge Autonomy in 2025. Since then, the company’s footprint in Latvia has grown significantly, with the opening of a 10,000 square-metre facility near Riga. “That expansion reflects a long-term commitment to developing and manufacturing technology in Latvia,” said Tuna Djemil, senior vice president at Redwire. 

One factor adding to the growing US awareness of the Baltic defence tech ecosystem is Russia’s war in Ukraine, with the Baltic countries some of Ukraine’s biggest supporters and closest collaborators. 

“Redwire’s acquisition of Edge Autonomy is one tangible example of that interest,” Djemil said. “The war in Ukraine has highlighted how quickly defence technology must evolve, particularly uncrewed systems and the payloads they carry, and the best way to keep pace is to work alongside end users directly engaged in operational environments where the requirements are shifting constantly.”

Sabaliauskas agrees that the war has helped boost US interest in Baltic defence tech. But this in of itself is not necessarily enough for US companies and investors, who chose partners based on pricing, production capacity and their ability to fulfil contractual obligations. 

“The war has increased interest in Baltic defence technologies, but the long-term economic benefits will depend on whether companies can translate this experience into competitive products and sustainable orders,” he said. 

“Lithuania's domestic market will remain relatively small,” he went on. “Consequently, the sector's long-term growth will depend heavily on exports and integration into international supply chains.”

For the defence tech sector in the Baltics, finding a way to tap into the US market as a seller, and not just a buyer, is crucial for continued development.