What role will energy and minerals play in the future of Greenland?

Date of publication: 
30 July 2015

Greenland is reassessing the potential for its minerals and energy resources to help the country secure independence from Denmark. There are several reasons for this. The oil price crash of 2014 led several oil majors to halt exploration; in January this year a major iron ore project had to be rescued from bankruptcy by the Chinese; and ‘the uranium question’ remains acutely sensitive.

Public sector accountability in both Greenland and Denmark also appears to be in question as both the former Greenlandic prime minister and the newly-elected Danish prime minister have been accused of misusing public funds, while an NGO coalition has been set up in Greenland to improve public involvement in government decision-making following public concern around consultation on mining projects.

A report I recently produced for IIED urges Greenland to ‘take a deep breath’ before launching into industrial-scale energy and minerals development. Such a pause may be inevitable in the current economic climate, but Greenland shouldn’t miss this opportunity to review its economic model, strengthen accountability and regulation, and fully understand the needs and potential of its population.

Greenland has a population of less than 56,000 mostly indigenous Inuit. As part of the Kingdom of Denmark, Greenland receives an annual block grant of around £400 million from Copenhagen (or 30 per cent of GDP). A 2014 report concluded that Greenland’s mineral resources alone cannot replace the subsidy.

According to some experts, Greenland would need to export oil to generate sufficient revenues to support independence. Yet even if oil were produced successfully it would take many years to set up an export industry. The oil price crash of 2014 was a reminder of the unreliability of commodity markets, with Statoil, GDF Suez and Dong Energy all returning their exploration licences. This was disappointing for the local industry and local people who had benefited from exploration activities, but good news for environmentalists who had highlighted the inadequacy of oil spill response capacities and the broader environmental and climate change implications of Arctic oil extraction.

Greenland has only two ‘large-scale’ (economically significant) mining projects, Isua (iron ore) and Kvanefjeld (rare earth minerals). In October 2013, UK-based London Mining was awarded a 30-year licence to build a vast open-cast iron ore mine in western Greenland (the Isua Project). By October 2014 the company had gone into administration following a slump in iron ore prices and losses made in Sierra Leone where their operations were badly hit by Ebola. In January 2015, the project was taken over by one of China’s largest coal and iron ore companies, General Nice. The Isua project has been plagued by complaints of inadequate public consultation. It remains to be seen whether the new owners will address these concerns.

The Kvanefjeld project lies close to the small settlement of Narsaq (population 1500) where Greenland Minerals and Energy has been exploring for rare earth minerals and uranium. In October 2013, following a close parliamentary vote, a 25-year ban on uranium mining was lifted, ostensibly to allow for the extraction of rare earths. The decision led to protests in Greenland’s capital, Nuuk, and a split in the governing coalition.

Experts have also warned about the complexity of uranium governance which is divided between Greenland and Denmark, and the need for high levels of control and technical competence. So Greenland is unlikely to become a uranium exporter any time soon, even if the government gains public support.

Focusing on large scale projects can stifle opportunities that could provide real value to local people. Specifically, the opportunity exists for Greenland to develop an ethical gemstone industry, for which there is genuine demand internationally. In the past, artisanal miners could gather rubies without a licence and process and sell the rubies they found. Yet opening up Greenland’s rubies to commercial exploitation has limited access for local miners. For example, on 16 August 2007 miners were detained by the police after gathering gems on a site licenced to Canadian company True North Gems. The 16 August Union was set up to defend the rights of artisanal miners and support small-scale mining.

Greg Valerio of Fair Jewellery Action states: ‘A Greenland ruby or sapphire that enshrines the values of local community, responsible environmental small-scale mining, economic regeneration and human rights will be precisely the kind of gemstone the jewellery industry is looking to get behind.’

Greenland’s government is now recognizing the need to diversify. Premier Kim Kielsen, voted in last November after an expenses scandal unseated the last prime minister, understands that ‘minerals are not a silver bullet’. His government will continue to promote uranium and other minerals, but will also support other economic activities, including fishing (Greenland’s largest economic sector) and tourism. (Perhaps also ethical gemstones …)

My report highlights the need to promote local development opportunities and resilience within local societies; build accountability into governance at all levels; and ensure meaningful public involvement in decision-making. Greenland needs to develop on its own terms, but can learn much from international experience. I hope this report will make a useful contribution to the debate.

Emma Wilson is an independent researcher and consultant on energy and extractive industries. Contact her at: emma.wilson [at] ecwenergy [dot] com

More information – and download of report is available here – http://pubs.iied.org/16561IIED.html