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Feb 1, 2013 | 11:30 GMT

Greenland: A Potential Natural Resource Treasure

Uriel Sinai/Getty Images
Summary

Greenland's potential to become an important supplier of numerous natural resources — including uranium and rare earth metals — is gaining international attention. Despite its strong historical ties to Europe, the Arctic island has resisted offers to form strategic partnerships with the Europeans that would limit the involvement of other possible investors such as China, which is showing great interest in the region.

Greenland, which is still a semi-autonomous territory of Denmark, wants to use its natural resources to reduce its dependence on Europe and strengthen its independence. This puts Denmark in a difficult position. Instead of hindering the development of Greenland's mining sector and risking conflict with the territory's population, Copenhagen will make greater efforts to negotiate a strategic partnership with the Greenlandic government and ensure European access to natural resources that the Continent largely lacks.

The Danish press reported Jan. 26 that a majority in Denmark's parliament is willing to change aspects of the country's nuclear policy in order to facilitate uranium mining in Greenland. The island is believed to possess one of the 10 largest deposits of uranium in the world.

Greenland

Locator Map - Greenland

Although Greenland is largely autonomous, it is still influenced by decisions made in Copenhagen. Over the past decades, Greenland has gained greater independence from Denmark, and since 2009 the government in Nuuk has controlled several policy areas, including the island's natural resources. However, Copenhagen is still responsible for the territory's monetary, foreign and defense policies, and Denmark's strong anti-nuclear policy has prevented the extraction of Greenland's uranium. In the 1980s, Denmark prohibited the construction of nuclear power plants and the mining of radioactive materials — including uranium — within Danish territory. Since exporting uranium would have important consequences for the foreign and defense policies, Nuuk is required to gain approval from Copenhagen before proceeding with the mining of the radioactive material and allow the necessary international treaties to be established — despite Greenland's control over its natural resources policy.

More Than Uranium

Greenland is believed to also contain around 10 percent of the world's rare earth metals. Supplies of these resources are low due to the complicated mining processes required to extract them, but demand for the metals is high since they are important inputs for numerous advanced electronic products. China, which according to the U.S. Geological Survey has around one-third of global rare earth reserves, currently provides more than 95 percent of the rare earths used worldwide. Industrialized countries are looking for new mining opportunities and alternatives to these metals in order to weaken China's monopoly on production. Studies have shown that the deposits in southwestern Greenland could meet about one-fifth of global rare earth demand.

The problem is that mining for rare earths would likely involve the extraction of radioactive elements such as uranium, since rare earth metals are almost always located alongside radioactive materials. In 2010, Greenland weakened its own restriction on exploration for (but not the actual mining of) radioactive elements in order to facilitate continued research of its rare earth reserves. However, with the report that the Danish parliament would allow Greenland to mine for radioactive materials, the prospects of mining the island have brightened.

Several obstacles to mining remain, however. For instance, the question of where extracted rare earths would be processed would have to be addressed. Moreover, Greenlandic politicians will be debating the benefits of mining uranium and rare earths. Nuuk has made it clear that it will decide whether the mining of radioactive materials will proceed. In the coming months, Greenland's Bureau of Minerals and Petroleum will publish a report on the environmental and health effects of uranium mining. After that, the Greenlandic Parliament will debate whether such extraction should be allowed. Several lawmakers have highlighted the economic benefits of mining, but a significant faction wants to maintain the ban out of concern that mining could damage the island's fragile environment. This debate will be an important topic leading up to Greenland's elections, which have been slated for March 12.

Greenland's Drive for Independence from Europe

The possibility of mining in Greenland will also be an important topic in Copenhagen in the coming months. In February, the Danish parliament is expected to discuss Denmark's policy toward Greenland, and calls for Copenhagen to be more proactive in the territory are mounting. Earlier this month, Danish politicians proposed setting up a state-owned company that would invest in Greenlandic mining activities and ensure that other investors, such as China, would not gain too large a foothold.

Greenlandic officials have said that Danish companies are welcome, but Nuuk so far has opposed having a special agreement with Denmark that promotes state-backed investment. Greenland on several occasions has highlighted its desire to ensure its independence from Copenhagen, and Europe in general, regarding the development of the island's mining sector. Earlier this month, Greenland reportedly spoke out against demands from the European Union to essentially reserve its natural resource deposits for Europe. Greenlandic Prime Minister Kuupik Kleist said Greenland is unwilling to exclude investors from certain countries without specific reasons.

The Europeans especially fear China's expanding involvement in Greenland's mining sector. Last year, Chinese and South Korean companies showed interest in investing in the mining of iron ore and rare earths on the island. In December 2012, Nuuk passed a law allowing foreign companies to bring in their own workers, since Greenland (with a population of 57,000) lacks size and expertise to meet labor needs. For example, Chinese companies interested in developing the island's road network, building airports and expanding the port in Nuuk to facilitate mining activity are planning to import thousands of Chinese workers. So far, none of these activities has actually started, and Greenland's mining sector is still in the exploration phase.

According to the European Union, only 15 percent of the exploration companies operating in Greenland are from EU countries. More than half are Australian and Canadian. As a result of growing global interest in Greenland, Europe — and especially Denmark — will intensify efforts to ensure that Europe profits the most from the island's wealth of natural resources once it is tapped.

Denmark still has considerable influence over Greenland. Apart from being responsible for the territory's foreign and defense policies, Denmark also provides more than half of Greenland's budget and is the island's main trading partner. However, Copenhagen will not likely threaten to withdraw economic assistance to get better access to Greenland's natural resources. After Denmark granted Greenland greater independence, efforts to regain control over the island would alienate the Greenlandic population and likely make it easier for other players such as China or the United States to gain greater access in exchange for financial aid.

It is more likely that Denmark will try to cement Greenland's orientation toward Europe by promoting European investment and highlighting the risks of being exploited by non-European players. Denmark will probably promote the idea that European investment would be more sustainable. Moreover, Copenhagen will continue to use its political and cultural ties to influence Nuuk's natural resources policy through its own foreign and security policies.

Editor's Note: A previous version of this analysis reported a different date for Greenland's elections, which have since been slated for March 12, 2013.

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