Heat 1 teaspoon coconut oil in a Dutch oven over medium heat. Add the onions and saute until tender, 2 to 3 minutes. Remove from the heat.
In a large bowl, combine the beef, onions, garlic, egg, rice, breadcrumbs, 1 teaspoon salt and 1 teaspoon pepper and stir until well combined. Scoop the meatballs using a 2-tablespoon or 1-ounce scoop and put on a plate or baking sheet until ready to sear. You should have about 20 meatballs.
Heat 1 tablespoon coconut oil in the Dutch oven over medium heat and working in batches, brown the meatballs, about 2 minutes on each side. Remove from the pot and drain the fat.
Return the Dutch oven to medium heat, add the tomato sauce and scrape up the browned bits from the bottom of the pot. Stir in the sauerkraut, Italian seasoning and salt and pepper, to taste. Put the meatballs into the sauce in one layer. Turn the heat to medium low, cover and simmer until meatballs are no longer pink on the inside and the rice is tender, 20 to 25 minutes.