Danish Institute for International Studies

Strictly business?: CHINESE INVESTMENTS IN GREENLAND RAISE US CONCERNS

Author(s): Hans Lucht
Danish Institute for International Studies (2018)

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DIIS POLICY BRIEF NOVEMBER 2018

Strictly business?

CHINESE INVESTMENTS IN GREENLAND

RAISE US CONCERNS

China’s growing interest in Greenland is being

RECOMMENDATIONS
followed closely in the US and is putting a
strain on the relationship between the Danish ■ The Greenlandic and Danish governments must
and Greenlandic governments. handle China’s intersecting business and political
interests without straining the relationship
Chinese investments in the Arctic have been the between Nuuk and Copenhagen.
subject of much interest and debate among experts
■ Denmark and Greenland will have to manage
and policy-makers, especially since the publication
not only growing Chinese investments, but also
this year of China’s Arctic Policy. The question is
how the US chooses to push back against
sometimes framed as a dichotomy: does China have
China’s interests.
legitimate scientific and business interests in the
Arctic region, or is it seeking geopolitical influence? ■ For now, at least, mining represents an oppor­

The answer is probably both. tunity to attract Chinese investment without

alienating the US, but it will continue to generate
strong local tensions.

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The US is closely watching Chinese moves in the
Arctic and is scaling up its military activities.

Mining in Greenland is a business opportunity, but China is also seeking long-term

political leverage.

In Greenland, two large infrastructure projects are another example of what the current US administra-
currently in the spotlight because of Chinese tion’s narrative calls China’s ‘debt-trap diplomacy’.
participation: This analysis claims that China finances new
Chinese-built infrastructure through loans that poorer
1. the prequalification of a bid by Chinese construc- countries cannot pay back with a view to gaining
tion giant China Communications Construction political and eventually military sway over them.
Company (CCCC) to construct and expand three
new Greenlandic airports. To accommodate its concerns, Denmark offered to
part-finance and co-own the new airports in Nuuk,
2. the Kuannersuit/Kvanefjeld rare earth elements Ilulissat and Qaqortoq, echoing how in 2016 Denmark
(REE) mining project in Narsaq, partly owned by took a decommissioned US-built naval base,
Chinese trading, mining and REE production giant Grønnedal, off the market when it emerged that the
Shenghe Resources. Chinese company General Nice Group had expressed
an interest in buying it.
With regard to the new airport project, the global
struggle for power between the US and China and the However, Denmark has not demanded that the CCCC
US pushback against China’s agenda have clearly be blacklisted from the airport project in return for the
made themselves felt, whereas the mining of REEs at investment. This situation prompted the US Deputy
Kvanefjeld has received less US attention. This brief Assistant Secretary of Defense, Katie Wheelbarger, to
will provide a short overview of the two projects and warn Denmark publicly about China’s motives and
discuss their main geopolitical ramifications. how it uses its economic power to establish a military
presence. Clarifying the Danish position, Danish
Building an airport, or building a military presence? Minister of Defense Frederiksen argued that, as long
The new airport project in Greenland has led to as the Greenland airport project is not financed or run
tensions between Denmark and the Greenland by China, but by Denmark and Greenland together,
Self-Government after the Greenlandic airport Denmark sees no problem.
authorities, having long encouraged Chinese invest-
ments, prequalified a proposal from China’s CCCC and This example shows that Denmark and Greenland will
five other companies. Because of the scale of the have to manage not only growing Chinese invest-
project and the debts incurred, Danish PM Rasmus- ments but also how the US chooses to push back
sen has raised concerns over it. The project falls into against China’s agenda.
the grey zone between Greenland’s self-determination
in relation to issues of development and infrastructure In this case, even though the ‘debt-trap diplomacy’
and Denmark’s jurisdiction with regard to foreign argument had been made largely redundant, the US
policy and security issues. administration still came out against Chinese involve-
ment in the airport. This was not unexpected, as
On the level of global politics, Chinese participation in Senior Researcher Henrik Ø. Breitenbauch has argued.
the Greenlandic airport project could be seen as The US is closely watching Chinese moves in the

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Arctic and is scaling up its military activities. Thus, a independence from Denmark and therefore the
week after the airport deal was announced, the US freedom to negotiate foreign policy and security
Department of Defense released its own statement, matters with whomever it chooses.
promising investments in Greenlandic airports which
have dual civilian and military use, though the details Mining raises local concerns, but no
remain sketchy. US pushback as yet
In Narsaq, a quiet, picturesque town in southern
The former US administration’s focus on climate Greenland with a little more than 1500 inhabitants
change and regional governance may have been famous for producing sheep and vegetables, opinions
toned down, but it would be a mistake to assume that are starkly divided over the Australian-based Green-
the Trump administration’s ‘America First’ agenda land Minerals and Energy (GME) REE project. The
means that Greenland or the Arctic region have fallen local concern, however, is not so much the 12.5
off the US radar. As Arctic researcher Rasmus percent Chinese ownership, but the environmental
Kjærgaard Rasmussen has recently argued, Green- consequences of open-pit mining should it be given
land is geographically part of the North American the go-ahead, which is looking increasingly likely.
continent, and the US has a very low tolerance of
Chinese activities close to its borders. Demand for REEs in the so-called green-energy sector
is expected to increase in the coming years. Such
Generally, however, given Denmark’s close alignment minerals are used, for example, in wind turbines, solar
with American strategic interests, geopolitical energy and electric cars, as well as in products such
tensions over Greenland remain at a low intensity. as smart phones and flat screens. But in mining the
That could change were Greenland to obtain full Kvanefjeld REEs, GME will produce uranium as a

Demonstration in Nuuk against the repeal of the zero-tolerance law regarding the extraction of uranium.
Ritzau Scanpix, Ulrik Bang.

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DIIS POLICY BRIEF NOVEMBER 2018

byproduct, and it proposes to store the residue, or In terms of the business arrangement at the
so-called tailings, in a lake in the mountains above Kvanefjeld project, GME needs state-supported
Narsaq. The greatest challenge is how to manage Shenghe Resources’ technology to produce and
the tailings and the radioactive water in the lake, the market the REEs, while Shenghe Resources needs
local concern being that the waste products will end GME’s license for the Kvanefjeld plot to ensure the
up in the river and the town. To others, however, the continued supply of raw materials for the global REE
mine represents the prospect of hundreds of new market that China already controls. Incidentally,
jobs and development, which are sorely needed in Shenghe Resources is a major investor in the US too,
southern Greenland. having acquired Mountain Pass in California in 2017,
one of the biggest REE mines outside China.
This fall the GME presented its final environmental
assessment report, having spent almost a decade and In an analysis of China’s state-supported mining and
about 100 million dollars in addressing the concerns its place in China’s Arctic strategy, Patrik Andersson,
of the Greenlandic authorities. The report is currently Jesper Zeuthen and Per Kalvig have recently argued
being read by Danish consultants. Leaks to the press that ‘Greenland has strategic value for China both as a
say that there is little danger to people or nature. This source of important minerals and as a foothold for
conclusion, however, has already been contested by accessing the Arctic region’. In other words, mining in
environmental organizations, and since uranium Greenland is a business opportunity, but China is also
mining remains controversial in Greenland, the debate seeking long-term political leverage through the
is likely to continue if the project enters its hearing limited options to become involved in the region.
phase next year.
Even if China wanted to play a greater part in the
Unlike the airport project, the US has not pushed back geopolitics of the region it has limited options of
against Chinese participation in mining in Greenland, engagement, as China scholar Yun Sun argues. China
probably because, unlike an airport, mining is not of is restrained by its geographical distance to the region
direct strategic concern to the US. Moreover, despite and its non-Arctic status and therefore tends to
the name, REEs are not really that rare but difficult to pursue soft policy goals such as scientific and
mine and commercialize. Chinese companies have economic cooperation, especially on a bilateral level,
managed both the technological and the commercial and to shy away from political, security and military
aspects but, as some observers argue, should China issues. However, Sun adds, China’s Arctic policy is
dramatically raise REE prices or restrict their availabili- only in its infancy and is expected to pick up steam in
ty, production could be diversified to compensate. For the coming years.
now, at least, investing in mining represents an
opportunity to attract Chinese investment in infra-
structure without alienating the US. Further readings
Lill Rastad Bjørst: “Uranium: The Road to Economic Self-
One detail that could raise eyebrows down the line, Sustainability for Greenland? Changing Uranium-Positions in

however, is GME’s recent addition of China’s state- Greenlandic Politics”, 2017

owned CCCC, among other engineering companies, in

Ulrik Pram Gad: “Imagining China on Greenland’s road to
the construction of a new port facility at Narsaq.
independence” from Arctic Yearbook, 2018
CCCC is one of the biggest companies in the world
and, as mentioned above, is also bidding to construct
Yun Sun: “The Intricacy of China’s Arctic Policy”, 2018
the new Greenlandic airports.

Hans Lucht, Senior Researcher (halu@diis.dk)

Cover photo: A camp set up by Greenland Minerals and Energy on a proposed rare earth minerals mine above the town of Narsaq.
Ritzau Scanpix, Andrew Testa

DIIS· DANISH INSTITUTE FOR INTERNATIONAL STUDIES

www.diis.dk

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