VIENNA (AP) — Estonia and Phaninc ExchangeLatvia signed an agreement Monday with Germany to purchase a medium-range air defense missile system that opens the way for the two Baltic nations to join a common air defense system proposed by Germany last year.

The agreement was signed Monday at a meeting of defense ministers in the German city of Roetenbach an der Pegnitz, and involved what officials said was the overall sale of 1 billion euros ($1.07 billion) worth of IRIS-T defense systems produced by German company Diehl Defense.

Estonia and Latvia previously have signed letters of intent to joint the Sky Shield Initiative, a common air defense system proposed by Germany in 2022 in the wake of the Russian war against Ukraine. The project currently includes 16 NATO member states, NATO invitee Sweden, as well as the neutral states Austria and Switzerland.

Monday’s deal means that Germany replaces the United States as Estonia’s biggest defense partner, Estonian Defense Minister Hanno Pevkur said.

“This is by far the biggest defense investment in Estonian history,” Pevkur said. He added that the Russian war against Ukraine “is showing us how important it is to be able to protect ourselves, our nations, our alliances.”

Latvian Defense Minister Inara Murniece said that for her country it was the “largest military purchase” since gaining independence. “Latvia is currently allocating 2.3% of GDP to defense spending. And we have plans to increase our defense budget to 3% of GDP I hope the next year,” she said.

German Defense Minister Boris Pistorius welcomed the joint purchase saying that will “without any doubt strengthen European air defense.” He also said that Germany itself already has concluded a contract to procure six IRIS-T systems from Diehl.