BUS604: Innovation and Sustainability

The Kingdom of Denmark extends far into the Arctic because of the Faroe Islands and Greenland – an Arctic island more than 2 million sq km in size, inhabited by fewer than 57,000 people. A dispute between Norway and Denmark about the sovereignty of the eastern part of Greenland was settled in 1933 by the Permanent Court of International Justice, which agreed that uncolonised parts of eastern Greenland were not terra nullius but fell under Danish sovereignty. The judgment also specified that "the two elements necessary to establish a valid title to sovereignty" had to be present,  "namely: the intention and will to exercise such sovereignty and the manifestation of State activity".  Since then Denmark has maintained a presence with a military dog-sledge patrol, where six two-man teams carry out a 3,000 km heroic schlep in the desolate parts of Greenland. In addition, the Danish defense Forces enforce sovereignty on behalf of the Kingdom and maintain a continuous presence with patrol ships and surveillance aircraft. Thus sovereignty is upheld in accordance with international law. Today, several visions and concepts have emerged for the Arctic in general, and the status of Greenland in particular.

Greenland has not been economically self-sufficient in the past, and today, with fewer than 27,000 people in the workforce, it is still far from being so. Nonetheless, in recent years there have been some calls for political independence, because of a very real possibility of economic independence. Greenland was granted home rule in 1979 and a self-rule agreement went into force on 21 June 2009. Following this agreement, Copenhagen still pays for half of Greenland's budget with DKK 3.4 billion ($593 million or €455 million) annually. The Greenlandic economy has traditionally been based on fishing and hunting. But the discovery of oil, gas, and minerals, including the highest deposits of rare earth oxide outside China's Bayan Obo mining district, has opened new avenues to potential unprecedented riches.

The strategic importance of the 17 heavy and light rare earth elements (REE) has grown in recent decades. They possess a unique set of metallurgical, catalytic, electrical, magnetic, and optical properties.  China currently controls more than 95 per cent of the rare earth market and is hoarding reserves as a strategic deposit – and alongside British and Australian companies, the Chinese have submitted bids for Greenlandic fields. This is a great challenge to the West, where both the US and the EU have declared REE among their long-term strategic priorities. Greenland's rare earth deposits are found in two districts, Kringlerne and Kvanefjeld. Because the rich rare earth deposits in Kvanefjeld are structurally connected to uranium, these deposits cannot be capitalized upon before Greenland and Denmark agree on a common uranium export policy. To tap the mineral wealth of rare earths and uranium, as well as the estimated 50 billion barrels of offshore oil and gas, Greenland is seeking to attract long-term investments, but these require a level of stability and human development that Greenland currently does not possess.

With these riches in sight, members of the Greenland political class have expressed a vision calling for independence, but this cannot be translated into a viable concept or strategy. Economic development is not enough to build a sovereign state unless it is complemented by the development of human and state capacity and institutions. 

The 2009 Self-Rule Act transferred to Greenland authority over 33 new areas of responsibility, including the management of natural resources, while foreign and security policy remain the remit of the Danish government in Copenhagen. The Self-Rule Act does not present a solution to the problem of rare earth and uranium minerals that are both an economic and strategic matter. Who controls these resources and where they end up is a matter of national and international security.

The Greenlandic view, pointing to the self-rule agreement, is that they can sell concessions to their mineral resources to whomever they want and get all the money. The Danish government in turn points to the Constitution of Denmark and says that it remains responsible for foreign, security, and defense policy. Both are right, and heated political discussions in Copenhagen and Greenland's capital, Nuuk, have led the Danish Ministry of Foreign Affairs to intervene and negotiate an agreement for closer cooperation and coordination in the Kingdom's common security policy.

To resolve this dilemma, a grand strategy is needed that starts with the recognition that control over minerals such as uranium and REE has both an economic and security impact.  

Admiral Nils Wang brought this dilemma to public attention in June 2012, arguing that short-term economic interests should not lead to the sacrifice of long-term strategic interests.  He cited the example of the Australian government blocking an attempt by the Chinese government to purchase a controlling stake in the Lynas Corporation, a rare-earth mining company, because it recognised the long-term strategic risks of allowing China to tighten its monopolistic grip on rare earths. The Greenlandic Mineral Strategy 2009, on the other hand, only mentions exploration, geology, mineral potential, environment, economy, employment, and Greenlandic values.  The Greenland government has not considered all the strategic consequences of its actions.

In the March 2013 Greenland parliamentary election, the opposition Siumut party emerged as the winner, defeating the ruling Inuit Ataqatigiit party in a contest that centered on the regulatory framework for the mining industry and the question of the 'zero-tolerance policy' towards uranium exploitation that prevented the exploitation of rare earths in Kvanefjeld. With Greenland's first female Prime Minister, Aleqa Hammond, at the helm, a more nationalist course towards Denmark emerged, and shortly after the election the new government changed the regulatory framework and abandoned the more than 30-year-old 'zero-tolerance policy' by a single-vote margin in parliament. But to be able to export uranium, Greenland must accede to the necessary control regimes and possess the necessary "expertise to handle uranium in accordance with international treaties, which might take five to ten years to develop," wrote Wang and co-author Damien Degeorges in a report.  It remains to be seen how these developments in Greenland affect Denmark's long-term strategic interests.

Increased interest in Arctic resources in general, and rare earths in particular, are causing Greenland to "quickly become clogged with wealthy international dance partners".  This recognition on the world stage is highlighted by high-profile meetings. In 2012, the South Korean President, Lee MyungBak, visited Greenland without stopping in Denmark; and when Greenland's Minister for Industry and Natural Resources Ove Karl Bertelsen, visited China, he was received by the then Deputy Prime Minister, Li Keqiang, now Prime Minister.

The Danes cannot blame the Greenlanders for being tempted by the prospect of Chinese or other investors, if they are not offering a better alternative. Admiral Wang's column contributed to alerting Copenhagen to these questions, and now there is a growing understanding in the business sector and among pension funds that Greenland might be a lucrative long-term investment area.

Strategy abhors a vacuum. Instant independence for Greenland is not realistic because it would create a sudden gap in the NATO treaty area and Denmark would cease to be a littoral state. But more importantly, Greenland is not yet viable as an independent state because its population lacks the necessary resources and skills. Even if it were to 'outsource' external security to NATO and Denmark, on the Icelandic model, it would still have to pay for and manage its own coastguard – as Iceland does – for sea surveillance, fishery protection, and search-and-rescue.  These require not only large investments, but also the development of a skill set not currently present in Greenland's population.

Now that the noise and dust of electioneering has settled, a few sobering assessments of Greenland have appeared. Wang and Degeorges conclude:

Educational standards need to undergo significant improvement if Greenland wants to build a sufficiently skilled workforce that could form the foundation for the required future political and central administrative system. The development of a viable Greenlandic state is heavily dependent on improving the general level of education, as well as the need for a highly educated elite with a deep understanding of global affairs.

The long-term process of economic development should lead to human development, and efforts need to be made to prevent corruption, nepotism, and the 'resource curse'. It is a generational question whether Greenland can elevate itself to the status of a viable sovereign state, and it would take 30 to 40 years to be a realistic prospect.  These conclusions were reinforced in a report published in early 2014, To the Benefit of Greenland, that was developed by the Universities of Copenhagen and Greenland.

In May 2014, the Greenlandic Prime Minister Aleqa Hammond wrote an op-ed article, with Professor Minik Rosing, welcoming the report, highlighting policy priorities of Greenlandic development, and the ways in which mineral development will benefit the population. In addition to resource development, "Greenland has formulated an ambitious plan to raise the education level with massive investment in primary schools, secondary schools, vocational schools, and the university".  These are welcome signs of long-term realism replacing the short-term nationalism that characterised the elections of the previous year.

On the international level, Denmark does not have a fully integrated Arctic grand strategy, but progress has been made in the scientific, legal, diplomatic, and defense spheres. As mentioned, Denmark dispatched a scientific expedition in the summer of 2012 to collect seismic data in preparation of its claim to the Commission on the Limits of the Continental Shelf before 16 November 2014. The Danish Ministry of Foreign Affairs published the Kingdom of Denmark Strategy for the Arctic 2011-2020, a mildly worded document that covers a familiar spectrum of themes in international cooperation and security, sustainable development, environmental protection and maritime security. It is slightly more comprehensive than its Norwegian counterpart, but its tenor is similar and it has a more assertive conclusion. In a brief section on exercising sovereignty the bottom line emerges: while cooperation with the Arctic Ocean's coastal states is close, "there will be continuing need to enforce the Kingdom's sovereignty, especially in light of the anticipated increase in activity in the region".

The Danish defense Agreement 2010-2014 white paper specifies several overriding initiatives for the Arctic. The North Atlantic command structure will be streamlined, by bringing Greenland Command and Faroe Command into a single joint service structure, the Arctic Command Headquarters, which was inaugurated on 31 October 2012. In addition, an Arctic Response Force has been established, and an extensive new risk analysis in and around Greenland is being conducted on the future tasks of the armed forces beyond 2014. This analysis is ongoing, and will be finalized by the end of 2014.

Denmark is the smallest Arctic country but is responsible for the largest land mass. A variety of visions has been expressed by Copenhagen and Nuuk, but neither the published Danish Arctic strategy nor the defense agreement provide satisfactory answers for the grand strategic implications of Greenland's resource wealth. It appears, however, that both Copenhagen and Nuuk have woken up to the implications of these matters with prudent assessments and policy concepts, where long-term strategies for investment, resource development, and human development are converging.