April 18th, 2021
Courtesy of STRATFOR (subscription required), an article on the race for Greenland’s mineral resources:
The appointment of an environmentalist government will temporarily delay mining operations in Greenland. But a combination of economic needs, pressure from great powers and opportunities created by climate change will result in growing international competition to exploit the island’s natural resources. Greenland is an autonomous territory within the Kingdom of Denmark. The left-wing environmentalist Inuit Ataqatigiit (IA) party won an April 6 parliamentary election on the island with roughly 37% of the vote, while the center-left Siumut party came in second with around 29% of the vote. While Greenland controls most of its own policy areas, its currency, defense and foreign policies are decided by Denmark. Greenland’s strategic position between North America, Europe and the Arctic explains foreign powers’ historic interests in the island. More recently, the prospect of vast mineral resources, including rare earth elements (a key component in high-tech products from smartphones to electric vehicles and defense equipment) has led to renewed interest in the island.
Greenland’s new government will probably suspend a large mining operation in the south of the island out of environmental concerns. But this will be a short-term situation that could change under a different government. The central topic of the electoral campaign was the future of the Kvanefjeld mine project in the southern part of the island. While Siumut supports it, arguing that it is vital for Greenland’s economic development, IA wants to halt it because of environmental risks, especially those connected to the presence of uranium.
- According to estimates, Greenland holds around 10% of the world’s rare earth reserves. Some estimations claim that the Kvanefjeld site is the world’s second-largest deposit of rare earth oxides and the sixth-largest deposit of uranium.
- In 2010, the island’s government relaxed regulations to open up the possibility of large-scale mining.
- Greenland’s new government will probably suspend the Kvanefjeld mine project, but this will be a short-term situation that will be subject to change under a different government.
- The suspension of the Kvanefjeld mine project would not necessarily mean the suspension of all mining activities in Greenland because IA’s core concern is uranium, not mining itself.
- IA will only control 12 of the 31 seats in the Greenlandic parliament, which means that it will need coalition partners. Considering that its potential allies (including the centrist Naleraq and the conservative Atassut parties) control a small number of seats and have conflicting ideological positions on several issues, the coalition will be fragile and under frequent threat of collapse.
As the Arctic warms and it becomes easier for companies to extract minerals, Greenland will increasingly see its natural resources as a key to reduce its financial dependence on Denmark. While a large part of Greenland’s population supports independence from Denmark, the island’s weak economy is a significant obstacle. Funds from Copenhagen represent half of Greenland’s budget and a quarter of its GDP. The political establishment has repeatedly called for greater diversification of the island’s economy, which currently relies on fishing and tourism, as a prerequisite to independence. 80% of Greenland’s territory is permanently covered by ice, but over time, the warming climate and technological advances will make it easier for companies to explore for minerals and hydrocarbons in parts of the island that are currently inaccessible. As a result, Greenland will increasingly see its natural resources as a key to economic growth and potential independence.
- According to the Danish constitution, Greenland can become independent if people vote for it in a referendum. Polls show a majority of the roughly 56,000 people living on the island support secession, but many voters are against independence if it results in lower standards of living.
- In 2008, Greenland’s citizens voted in favor of the Self-Government Act, which allows the local government to reach economic agreements with other countries.
In the coming years, competition among foreign powers to gain influence on the island and its vast natural resources will increase. The competition will be particularly acute if Greenland becomes independent and its foreign and defense policies are no longer decided by Denmark, a NATO member and close U.S. ally. China is both the largest resource and consumer of rare earths, representing around two-thirds of rare earth mining and more than 90% of global refining capacity. The United States, the European Union, the United Kingdom and others are interested in exploiting Greenland’s rare earth resources as an alternative to Chinese supplies. China, meanwhile, is interested in Greenland to secure its own supplies as its domestic demand rises. As a result, all of these actors are likely to increase their economic assistance to the island in the coming years in the hopes of influencing future governments’ decisions. In recent years, Denmark has used its control of Greenland’s foreign and defense policy to limit China’s presence on the island, but this will cease to be the case if the island becomes independent, setting up a fierce battle for influence.
- The United States offered to purchase Greenland twice (in 1946 and 2019), and has had an airbase on the island since 1950. Greenland is also an important piece in the U.S. strategy to secure diverse supply chains, including those involving critical minerals such as rare earths.
- In September 2020, the European Commission released a plan to diversify the bloc’s supplies of strategic raw materials, including rare earths. The bloc has long identified Greenland as part of that strategy.
- The United Kingdom also sees deeper economic cooperation with Greenland as a way to secure a diversified supply chain of minerals. In November 2020, London and Greenland signed a memorandum of understanding to boost cooperation on fisheries matters, a core sector of bilateral trade.
- China’s interest in Greenland is focused on polar research and natural resources, while Greenland wants Chinese investment to further develop its economy.
- In 2016, Copenhagen prevented a Chinese company from taking over an abandoned naval base in Greenland. Then in 2018, the Danish government decided to finance the construction of new airports in Greenland to prevent a Chinese company from doing it.
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