At first glance, geography, climate and culture suggest Estonia and Israel have little in common. One sits on the frosty edge of northeastern Europe, defined by pine forests, Baltic winds and a Nordic culture; the other is a mix of Mediterranean beaches, Semitic languages and biblical traditions.
Look closer, however, and the similarities surface: two small countries shaped by security concerns, punching above their weight as technological dynamos. Israel may hold the startup title, but Estonia is Europe’s tech powerhouse, leading the continent, per capita, in tech unicorns, privately held startup companies with $1 billion-plus valuations.
The recent establishment of Israel’s embassy in Talinn, Estonia’s capital, reflects an ongoing process of strengthening relations. In recent years, there has been significant growth in bilateral trade,” Amit Gil-Bayaz, Israel’s first ambassador to Estonia, told JNS.
Over the past five years, Estonian exports to Israel have surged at an annualized rate of 28%, while Israeli exports to Estonia grew at an annualized 22.1%.
MP Eerik-Niiles Kross, chairman of the Estonia-Israel Parliamentary Friendship Group, meeting with JNS in Estonia’s parliament, said his group was excited about the opening of the embassy. There are no anti-Israel parties in Estonia, he said, and most parties in parliament are represented in the friendship group.
Estonians’ affinity for Israel is partly due to their history of Soviet occupation. “In many regards, we still remember that under the Soviet Union, Moscow said, ‘Israel bad, [PLO Chairman Yasser] Arafat, good.’ For us, that meant, ‘Arafat bad, Israel good.’ As easy as that,” Kross said.
Estonia has resisted the trend to recognize a “State of Palestine.”
“We do not follow stupid and tacitly antisemitic trends in some Western European countries. We want to make sure that we stay firm in support of Israel,” Kross said.
The Estonia-Israel Friendship Group, and the Foreign Affairs Committee (they largely share the same members), help keep the Foreign Ministry and the government on the straight and narrow regarding Israel, he said. “They understand that we’re watching.”
In September, the friendship group was the target of a petition calling for its disbandment. The Foreign Affairs Committee was required by law to process the petition as it received the required 1,000 signatures within a month’s time. Kross said at the time that the petition had an antisemitic undertone and reflected a generational shift.
“We are obviously not immune entirely to the global trend in the Western world. Still, the problem isn’t “as overwhelming as in many countries in Western Europe.” In fact, many Estonians have become active in support of Israel, he said.
Ideas have been floated to increase Israel’s positive image, such as establishing a grassroots group that would organize Jewish cultural festivals and “remind the society that there is a lot more in Israel than the war,” he said.
Kross, who is not Jewish, remembers as a child being influenced by his father, who respected Jewish culture, and said there is much to learn from the Jewish people, particularly its emphasis on education.
With the opening of the Israeli embassy, Kross sees a path to more defense tech partnerships. He wants Estonia to look to Israel’s model of rapidly translating tech startup ideas into practical military solutions. More than 100 Israeli startups contributed to the Gaza war effort through the Israel’s Defense Ministry’s “Green Lane” program, which cut bureaucracy and streamlined the integration of new ideas.
Air and missile defenses are important to Estonia, which will probably start looking into space technologies as well, Kross said.
In 2023, 73% of Israel’s exports to Estonia were defense related.
The Ukraine war was a shock to the system for all of Europe, but especially countries bordering Russia. For Kross, at least, the invasion shattered no illusions. A prominent figure in the anti-Soviet resistance movement, he always viewed Russia as a threat.
Estonia has massively increased defense spending, from 2% of GDP in 2022, at the start of the Ukraine war, to approving an increase to 5.4% of GDP ($3.2 billion) this April. (The other Baltic states have done the same. Lithuania has boosted its defense spending a similar percentage. Latvia plans to follow suit.)
“The war in Ukraine has sharpened for many countries, including Estonia, the importance of security, national resilience and cooperation between democracies,” Ambassador Gil-Bayez told JNS. “However, relations between the countries are based on a broad and long-standing infrastructure.”
“Our cooperation started a while ago,” agreed Mariin Ratnik, the Estonian Foreign Ministry’s undersecretary for economic and development affairs. Estonia has watched and learned from Israel in building its startup nation.
“We see growing opportunities in the defense industry where our capabilities complement each other, be it sensors, lasers, drones or advanced optical elements,” Ratnik said. Estonia’s increased defense spending is a consensus issue, she added. The political opposition wanted to spend even more than 5.4% of GDP.
She said the Israeli embassy opening will certainly strengthen bilateral ties. She pointed to Israeli President Isaac Herzog’s visit in August. He brought a business delegation with him. Estonia organized a business seminar. Thirty Estonian companies attended. “That’s evidence of strong interest,” Ratnik said.
Israeli Foreign Minister Gideon Sa’ar, during his November visit to open the embassy, also brought a business delegation.
“What are the practical outcomes? I think that you’re already listening to the noise from the corridors,” Estonian Foreign Minister Margus Tsahkna told reporters at a press conference with Sa’ar. “We have 50 different businesses together holding a business seminar on all different levels. I’m not talking about just defense industry cooperation, but also cybersecurity, IT, energy.”
He expressed hope that tourism, which decreased in recent years, would pick up. Ratnik said that there has been talk about starting direct flights between the two countries.
In terms of tech, Estonia is perhaps most famous for its e-governance, something Sa’ar commented on during his visit. He said Israel could learn from Estonia, one of the most digitally advanced countries in Europe.
Virtually every government-related activity is conducted online, from filing taxes (a matter of minutes) to medical prescriptions (100% are digital) to voting (51% of Estonia’s voters used i-Voting during the 2023 parliamentary election).
Estonia estimates it saves 2% of GDP from the use of digital signatures, something which caught Sa’ar’s attention given Israel’s hidebound bureaucracy.
Estonia preaches the e-governance gospel to other countries. Key to success is trust. “As soon as there is mistrust that maybe my data is used without my knowing, or misused, it wouldn’t function,” said Ratnik.
JNS visited the e-Estonia Briefing center with a group of reporters from India.
Estonia’s move to digital began in the 1990s, when the government saw it as a way to catch up with the West after becoming an economic backwater under the Soviet Union. “It made sense because Estonia had been building computers for the entire Soviet Union since the 1960s,” Petra Holm, digital transformation adviser at e-Estonia, told the group.
Today, people post their times to boast how quickly they pay taxes, she said.
“Everyone involved doesn’t have to think about the government. Even the government doesn’t have to think about the government. Everything is automatic,” Holm said.
Estonia offers e-residency, a digital residency for which anyone can apply. It allows people to run E.U. businesses online. “An e-resident may not be located in Estonia at all. … They could be in India. They could be in Israel, ... and they could establish a company in Estonia without ever setting foot here,” Holm said.
The system was set up in 2014. So far, 877 Israelis have become e-residents, Ratnik said. “It’s mainly about creating a company here, which would right away also be in the European Union, which has a much larger market,” she noted.
How long does it take to set up a business in Estonia? Thirteen minutes and 25 seconds. That includes tax numbers and “all the elements you need to run a business,” Ratnik said.
