by Mikkel Schøler, CEO of Sikki.gl
One proposed mining project in Greenland has been driving many dynamics within Greenlandic politics for almost a decade. As the project inches closer to completion, this enterprise has the potential to affect great power politics as well.
Situated in beautiful Southern Greenland, the city of Narsaq, and its 1,346 inhabitants, live in an area steeped in history. Vikings – also known as the Norse – settled these parts more than a millennium ago, attracted by its fertile land, and even built the first Christian churches in North America on the site.
When the Norse settlers eventually disappeared, Inuit settled in the area. Today, the plains that give the city its name are used to farm cattle and sheep. Still, Narsaq is far from its heyday.
Since 1991, Narsaq has seen a population decline. While the overall Greenlandic population has grown slightly less than one percent, Narsaq has lost more than a quarter of the population over that same timeframe. While Greenland’s only abattoir is located in the city, unemployment is rampant with more than eight percent out of a job, which is 45% higher than the national average.
However, this figure alone does not depict the dire state Narsaq is truly in. Since 1991, Narsaq has been aging, and in 1991, pensioners represented just short of 6% of the population. Today they comprise close to 15%, which is seventy percent over the national average. Discounting children under the age of 17, just shy of 13% of the working population is unemployed. (Note: All statistics are from or calculated from stat.gl – The official Greenlandic Statistics bureau.)
Despite this bleak outlook, there is hope for the future. Extraction of a world-class deposit of rare earth elements (REEs), as well as fluorspar and uranium, located at nearby Kuannersuit (Kvanefjeld Mountain), is proposed by the Australian junior mining company Greenland minerals (formerly known as GME).
With the promise of 700-plus extra jobs, over 30-plus years, Kuannersuit could bring prosperity back to Narsaq. The mineral resource itself is well known, as Denmark extracted uranium from the site in an experiment with nuclear power. However, public protests under the slogans ‘No to nuclear power‘ and ‘No to uranium‘ led the Danish government to shelve plans for nuclear power development in 1985.
The construction costs alone of the proposed mine equals 40% of Greenland’s GDP, (Note: this is calculated based on the Kvanefjeld Project Impact Assessment Non-technical summary page 4 and GDP from stat.gl). It has the potential to change the future of both Narsaq and Greenland, although it would also dramatically alter Narsaq and its surroundings.
Politically, the resource has already altered the Greenlandic landscape.
In the 2013 Greenlandic parliamentary elections, mining was a central issue. Part of the debate was whether to allow for uranium mining. The two main contending parties, social democratic Siumut and left-wing Inuit Ataqatigiit (IA), were divided on the issue, though the incumbent IA government had sent mixed signals prior to the election.
Through most of Greenland’s political history, Siumut has been the main governing party often with IA as a coalition partner. In 2009, IA formed a coalition with a social-liberal party, the Democrats, marking the first time Siumut was out of power.
After Siumut came roaring back in the 2013 parliamentary elections under the leadership of Aleqa Hammond, coalition negotiations commenced, beginning with IA. The incumbent premier and party president, Kuupik Kleist, signaled an openness to at least negotiate a coalition with Siumut, in spite of the parties’ disagreement on uranium mining.
The IA party secretary, who proudly flashed his Urani Naamik (‘No to Uranium’) badge to the press when entering the negotiations quite visibly, undercut Kleist’s position. Negotiations were short, and Siumut formed a coalition without IA. Kleist resigned as party president shortly thereafter, and IA has doubled down on their opposition to uranium mining since, leaving IA outside looking in for the last eight years in Greenlandic politics.
Though never boring, this has led to an increased polarization in Greenlandic politics, where decisions often are made with overwhelming majorities.
Siumut has since held on to power and held the course on resource extraction – including uranium mining – ever since in shifting coalitions and across then party president and premier Aleqa Hammond’s resignation over accusations of misappropriation of funds.
Under the leadership of Kim Kielsen, Siumut has formed coalitions with all other parties, except IA, since 2014, with a strong emphasis on economic development through new airport infrastructures to increase tourism and through increasing Greenland’s attraction to mining companies.
In a somewhat surprising move, Kim Kielsen was supplanted as party president for Siumut in a December 2020 general assembly that was decided by a close vote of 32-39 in favour of former minister for mineral resources and labor, Erik Jensen. Jensen ran on a platform with little political differences with Kielsen except for the promise to be more inclusive, and to take the party more towards the left.
Traditionally, a change in the party leadership would lead to a change in the premiership as well, but so far, Kielsen still holds the office.
Jensen and the newly elected Siumut leadership, are both in a fragile position in the run-up to the municipal elections this coming April. Jensen led negotiations with coalition partners the Democrats and pro-independence Nunatta Qitornai in January this year, but had to press pause on negotiations after failing to reach an agreement. The three parties hold the narrowest possible majority, 17 out of 31 seats, in the Greenlandic parliament. New negotiations have been underway ahead of the winter parliamentary session beginning on 16 February.
The negotiations came to a head on 8 February, when the Democrats withdrew from the government coalition. According to the president of the Democrats, now former minister of industry and mineral resources Jens Frederik Nielsen, the Democrats withdrew due to concerns that Siumut no longer sought financial independence from Denmark, obviously referring to the Kuannersuit project.
The public consultations on the Kuannersuit Environmental Impact Assessment (EIA) and Social Impact Assessment (SIA) began on 21 December last year, with IA mobilizing support against the project in an unspoken alliance with the Uraani Naamik organization and the Danish chapter of the international grassroots organization Friends of the Earth International. This leaves Siumut vulnerable in Kommune Kujalleq (The Southern Municipality), as health and environmental concerns have been promoted, creating fears of the impact of the mining project.
When the first ore was removed from Kuannersuit in the early 1980s, the crushed residual rock was left in heaps. From here, the fluoride part of the fluorspar dissolved and entered the local water source, leading to the widespread joke that while people from Narsaq have the best teeth in Greenland from the fluoride, they also glow in the dark because of the uranium.
The GME Environmental Impact Report (EIA) has been reviewed by The Greenland Institute of Natural Resources and DCE – The National Center for Environment and Energy, which provides independent scientific advice for the Danish and Greenlandic governments. Though they recommend more studies on site – particularly on the fluoride capture and storage – their conclusion is that the Kuannersuit project “… with a high probability can be completed without further significant adverse effects than the ones described in the EIA rapport.” (Note: DCE/GN: Overordnede kommentarer til projektbeskrivelse og VVM rapport for Greenland Minerals Ltd – Projekt Kvanefjeld, page 11.)
In spite of the facts of the project, many in Narsaq fear the consequences of a mine with regard to the influx of foreign labour, and labour from other parts of Greenland. Also lost would be the access to nearby leisure activities, when Dyrnæs-valley stops being a beautiful riverbed with a cattle ranch and starts being the main thoroughfare for trucks transporting ore to the proposed docks built near the mouth of the river.
However, the tradeoff would be economic growth, jobs and a hope for the future of Narsaq.
The future of Narsaq, Kuannersuit and the Greenlandic resource industry is now very much up in the air, while Kielsen continues as prime minister until the parliamentary session on the 16th of February. On a press meeting announcing a reshuffling of responsibilities within the remaining ministers in the government, Kielsen left it up to a majority in the Greenlandic parliament to decide whether to hold early elections, with the Democrats neither for nor against the current Kielsen-led administration.
Jensen and the new Siumut leadership now finds itself in an unenviable position. Wanting to turn more to the left, IA would be the only viable alternative for Siumut. Realizing their position of strength, IA immediately declared that any coalition with IA would have to include a ban on uranium mining and a halt to the Kuannersuit project. If Jensen and the new Siumut leadership decides to stop or delay the approval process for the mine unduly, the repercussions for the future of the Greenlandic resource extraction industry would be dire.
While Greenland is home to almost every resource worth extracting, the scope of most resources are not understood in detail, making it imperative that mining juniors should want to invest large sums in drilling exploration cores. For mining juniors, each year passing between the first money invested and an operating mine are expensive. The return on investment (ROI) in exploration should always be compared to the ROI in any competing investment. If investors could have a relatively safe ROI on agricultural futures of five percent per year with compound interest, the potential return on a high-risk exploration project needs to be quite high. Each year of delay makes the initial exploration investment a worse comparable choice.
Thus, if Jensen and the new Siumut leadership halts or delays the Kuannersuit project, due to local or national political concerns, mining juniors would come nowhere near Greenland in the foreseeable future.
The same can be said for Jensen’s obvious ambition for becoming Greenland’s next premier. If Jensen cannot negotiate a new coalition agreement with the current party partners – or with other parties – it may well be better for him to leave Kielsen in place, until the Kuannersuit project has received its extraction permit. As soon as the permit is granted, Greenland would not be able to stop the project without becoming liable to serious financial repercussions from Greenland Minerals.
Should Jensen realize that an alternative coalition is impossible, he could throw his support behind Kielsen, until Kuannersuit receives it approval. The alternative is for Jensen or one of his supporters to support a vote of no confidence against Kielsen, forcing an election from a position of obvious weakness.
Politically, leaving Kielsen in place could be one path out of the current crisis. Obviously, the Kielsen supporters inside Siumut would like to see that happen. The Democrats are on the same page with Kielsen, wanting the permission process to run its course, as are Nunatta Qittornai.
With that obstacle out of the way, nothing is stopping Jensen from making good on his promise of turning Siumut more to the left by returning Greenlandic coalition building to the pre-Kuannersuit era.
Should the Kuannersuit project come into operation, the expected annual income for Greenland is estimated at upward of 1.2 billion DKK (US$194 million) annually. (Note: Kvanefjeld Project Impact Assessment Non-technical summary, page 5). This is far from enough to make Greenland independent in the short term, but it would solve a problem of an aging population, and in the long term, it has the potential to create real independence for Greenland.
Of the 1.2 billion, 262.5 million would go to cover Danish expenses per Section VIII of the 2009 Self Rule Act [pdf], 337.5 million DKK would by law be deposited in a Greenlandic Resource Fund built on a model of the Norwegian Oil Fund, where the base capital is untouched, but the interests can be spent in the annual budget. While half of the income for the resource fund would go to cover Danish expenditure, the project alone would accumulate more than 12 billion DKK in the fund over its 36-year projected operation. The remaining 600 million DKK in expected income would be via income tax from the workforce, which would immediately improve Greenland’s long-term financial outlook and counter the costs of an aging population.
In Greenlandic politics, there has been a longstanding and massive majority support for independence from Denmark. While Denmark has mostly ignored or ridiculed that potential until the 2019 Danish elections due to the 5.5-plus billion DKK Denmark spends [pdf] on Greenland, the Self Rule Act grants Greenland the right to independence, if and when it wants it.
While Kuannersuit in itself is not enough to make Greenland financially independent from Denmark, compound interest is a force of nature. Should a consensus form on becoming financially independent by leaving the interest rates in the fund, an annual compound real interest of six percent, (which is lower than most Danish pension funds has made on annual average since 2009), would make Greenland financially independent in 51 years, (under the expectation of a mine life extension from the 36 planned today), all other things being equal. At a seven percent average real annual interest, Greenland would reach that threshold in 44 years.
Local small scale license holders argue that gemstones such as tugtupite, (a.k.a. beryllium aluminium tectosilicate), which is found at Kuannersuit, could be mined, polished and sold by individuals instead of the large scale mine, however the manpower alone needed to bring in 1.5 billion DKK annually – not counting the lack of markets for such a quantity of stones – makes this argument moot.
One other point to keep in mind is that while Greenland has an operational ruby mine as well as an anorthisite mine, in operation, with a ilmenite project scheduled to open in 2022, the mines are all relatively minor operations at present.
If and when Kuannersuit comes into operation, GME and the Greenlandic political entity will have demonstrated the viability of mining in Greenland. Already, larger players are taking note. French government majority owned firm Orano has recently received permits for exploration for uranium at additional sites in Southern Greenland covering more than 3,500 km2.
Thus, bringing Kuannersuit online holds the potential to drastically accelerate the potential for Greenlandic financial independence from Denmark, but it also holds the potential to impact great power politics in the Arctic and beyond.
As the world’s main resource importer in an increasingly contested international trade regime, China has its eyes set on securing resource access in the medium to long term. China’s Shanghe Resource Holding Co. is a minority partner [pdf] in the Kuannersuit project, and thus Chinese interests are part of driving Greenlandic economic and political developments. Chinese companies are also involved in other potential extractive projects, most notably the Isua Iron mine site and the Citronen Fjord [pdf] zinc mine project. While both have received an extraction permit years ago, neither have presented a timeline for construction, as they have thus far failed to secure financing, leaving Kuannersuit the only project currently relevant.
China’s economic interests in Greenland continue to be an anathema to the United States. While Greenland focuses on diversifying its fisheries-based economy with tourism and resource extraction, each financial link between Greenland and China reduces Danish and American sway over Greenland and increases the possibility of Chinese influence over an area vital to American defence interests.
After mostly focusing elsewhere in the decades after 9/11, the US government under Donald Trump had been scrambling to reassert itself in the Arctic in general and in Greenland specifically. In June 2020, the US opened a consulate in the Greenlandic capital of Nuuk after announcing a US$12.1 million grant for financial development, including the resource sector, tourism and education in Greenland in April 2020.
Being courted by the United States and China as well as Denmark has given Greenland an enviable opportunity to build its international relations and capacity, while at the same time promoting the economic development it wants and needs.
However, in order to maximize these gains from the current international political situation, Greenland will first need to stay the course on resource extraction. While insisting on very high levels of environmental and health protection for these endeavours, Greenland cannot afford to be seen as dragging its feet.
While it remains to be seen if Greenland choses to take advantage of a once in a lifetime international political situation to advance its ambition of independence within a generation, the Kuannersuit mineral resource has impacted not only Greenlandic politics, but international politics as well, and will continue to do so for at least the coming year.
Even before the first rock has been mined.
Mikkel Schøler is the CEO of Sikki.gl, and has worked in Greenlandic politics and business for almost a decade.