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Oil & Minerals

“Not enough” minerals in Greenland to fund independence: report

Expert committee recommends diversified economy that includes a limited number of mines
Oil & Minerals
Grand, just not grand enough (Photo: GME)

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Factfile | Five scenarios for Greenland’s development
- Status quo
- Natural resource exporter
- Natural resource wealth fund established
- Multi-pronged strategy
- Independence

Factfile | Cost of independence: 5 billion kroner
An independent Greenlandic economy would, in addition to the 800 million kroner in increased annual costs in 2040, require 3.6 billion kroner a year to compensate for the block grant, 800 million kroner annually to fund public servies not yet transferred to Greenlandic responsibility, 190 million kroner annually to phase out subsidies from the EU and a further about 456 million kroner a year to carry out new tasks if Greenland decides to withdraw entirely from the Kingdom of Denmark.

Factfile | Kingdom-wide responsibities
Denmark is responsible for a number of public services, such as justice, foreign affairs, emergency services, fishery inspection and defence.

Factfile | Large-scale
Greenlandic law defines “large-scale” projects as those with construction costs of more than 5 billion kroner. Currently, only the Isua (iron) and Kvanefjeld (rare earths) mines fall into this category

Source: For the benefit of Greenland

Greenland’s financial future cannot be based solely on mining, an expert report to be released Friday concludes.

“Exploiting mineral resources could be an important aspect of building a nation with a self-sufficient economy in the geographical Greenland. However, this will not necessarily lead to greater independence for the Greenlandic population, as it is defined today,” the report, published by the universities of Greenland and Copenhagen, states.

Greenland, a self-governing member of the Kingdom of Denmark, currently receives 3.6 billion Danish kroner ($580 million) a year in the form of a block grant from Copenhagen. The money accounts for 30 percent of the country’s GDP.

Eliminating the block grant and replacing it with income from mining and oil exploitation is a message that Aleqa Hammond, Greenland’s pro-independence premier, has often repeated during the nine months she has been in power.

SEE RELATED: Health, wealth and independence

But, even if Greenland’s mineral resources proved as valuable as predicted, the country would need to develop other sources of income, and even then it would still be financially dependent on Copenhagen.

“Because of its economy and its demographics, Greenland will need to employ a range of different measures, and that includes a block grant for the foreseeable future,” said Minik Rosing, a leading geologist who headed the 13-member panel that authored the report. 

Greenland's Industry and Mineral Resources Ministry declined to comment about the report for this article, but others suggested it failed to consider all of the country’s development options.

“The recommendations are certainly not the best path for Greenland,” one source familiar with the report but not authorised to speak about it said.

The report presented five scenarios for potential Greenlandic development, but said the greatest overall returns would come through controlled development.

“As we see it, one possible way for Greenland to make the most of its natural resources would be to limit the number of mines and place them in carefully selected areas. All mines have undesired effects, but this would minimise their cultural and environmental impact,” Rosing said.

Save, don't squander
This go-slow approach, according to the committee, would allow Greenlanders to develop the job skills necessary for working in the mining industry. A rapid industrialisation, on the other hand, would limit the benefits mining by requiring the use of foreign labour.

The report also underscored the “absolute necessity” of establishing a natural resource wealth fund – similar to the fund that Norway uses to save and invest its oil wealth, and which has now swelled to a value of over 5 trillion Norwegian kroner ($818 billion).

Current law requires a portion of the income from natural resource exploitation to be placed in a wealth fund, but efforts to set up a fund have yet to begin.

“If work to establish such a fund does not begin in the near future, it will be difficult for Greenland to become economically self-sufficient,” Rosing said.

He worried that without the fund, Greenland’s natural resource deposits would be exploited without any of the proceeds being saved.

If that happened, he said, “the country’s national wealth would be squandered, leaving future generations with no way to provide for themselves.”