BUCHAREST, Romania (AP) -- NATO member Romania signed an agreement Monday with German defense company Rheinmetall to build a gunpowder factory in central Romania, as Europe races to rearm itself in the face of an increasingly provocative Russia.

After signing the deal, Prime Minister Ilie Bolojan hailed the joint venture between the Romanian state and Europe's largest arms producer as a sign that Romania is "emerging as a player with potential in the defense industry of Southeast Europe."

Construction of the 535 million-euro ($616 million) plant in the town of Victoria in Brasov County is expected to start in 2026, take three years to complete and create about 700 local jobs, he said. Romania will seek to finance part of its contributions through the European SAFE mechanism to encourage defense readiness.

"After many years in which our defense industry was in little demand, Romania is entering a new stage because of the security situation in Eastern Europe," Bolojan said. "I'm glad Rheinmetall sees us as an important and serious partner and is strengthening its presence in Romania."

Rheinmetall CEO Armin Papperger said the ammunition powder to be produced at the factory is "needed worldwide and especially in Europe," and will make Romania a key player in the continent's defense ecosystem.

"The strategy is to make Romania an integral part of the European ecosystem," Papperger said. "Romania will also be an integral part of the NATO ecosystem."

Since Russia launched its full invasion of Ukraine in 2022, Romania has played an increasingly prominent role in NATO. It has donated a Patriot missile system to Ukraine and opened an international training hub for F-16 jet pilots from allied countries, including Ukraine.