Berlin added that the two Baltic countries also signed a letter of intent towards participating in Germany's European Sky Shield Initiative (ESSI), launched last year in the wake of Russia's invasion of Ukraine.

"This is by far the biggest defence investment in Estonian history. Together with Latvia, almost 1 billion for their company is something we don't see every day," Estonian Defence Minister Hanno Pevkur told reporters.

"Russia's barbaric war in Ukraine has shown that air defence is critical to protect armed forces and critical infrastructure from air attacks," he added in a statement.

The signing ceremony took place at the Diehl Defence Development Centre in Rothenbach near Nuremberg in southern Germany.

"I'm very happy that our partners, Estonia and Latvia, have decided to procure the IRIS-T SLM. This will, without any doubt, strengthen European air defence," German Defence Minister Boris Pistorius said in Rothenbach.

"The letter of intent signed today serves to pull the national IRIS-T SLM procurement efforts under the umbrella of our ESSI initiative. I really appreciate that," he added alongside his Baltic counterparts.

Led by Germany, 19 European nations including Britain, Belgium, Finland, Hungary, the Netherlands and Sweden have banded together on the ground-based air defence under the ESSI project.

The Sky Shield system would involve joint procurement for short-, medium- and long-range systems, including the German-made Iris-T, the American Patriot and the US-Israeli Arrow-3 missiles.

But France, Italy and Poland have not signed up to the project, with Paris arguing instead for an air defence system using European equipment.

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