China’s Greenland Ambitions Run Into Local Politics, U.S. Influence

China’s ambitions to develop a massive rare-earth mine have run into a maelstrom of local politics in a part of the world the U.S. considers vital to its national security interests.

The U.S., China and the European Union have been circling Greenland in recent years as they jockey for influence in a region undergoing transformation as a result of climate change. Warming temperatures and melting ice have opened up the possibility of new shipping routes in the Arctic Sea as well as resource extraction.

China’s rare-earths giant Shenghe Resources Holding Co. and an Australian firm were on the cusp of developing a mine along the icebound island’s southern coast when Greenland’s government called a snap election amid mounting controversy over the project’s impact on the environment.

On Wednesday, Greenland’s left-wing pro-environment party Inuit Ataqatigiit finished first in that election with 37% of the vote, paving the way for IA’s 34-year-old leader, Mute Egede, to form a coalition government. The incumbent center-left party Siumut, meaning Forward, garnered only 29% of the vote after backing the mining project.

The election leaves in limbo a project that is part of Beijing’s quest to increase its grip on the world’s rare earths—the raw materials necessary to make the batteries and magnets that power everything from cellphones and electric cars to wind turbines. Global demand for rare earths is forecast to soar, as countries push to meet their commitments under the Paris Climate Accord, which President Biden has decided to rejoin.

China mines over 70% of the world’s rare earths and is responsible for 90% of the complex process to turn them into magnets, according to Adamas Intelligence, which provides research on minerals and metals. The mining project in Kvanefjeld, a mountainous area in Greenland known in Inuit as Kuannersuit, was expected to produce 10% of the world’s rare earths, according to Greenland Minerals, an Australia-based firm that holds the project’s exploratory license.

Shenghe, one of the world’s biggest producers of rare-earths materials, acquired a 12.5% stake in Greenland Minerals in 2016, making it the company’s largest shareholder. Since then, Shenghe’s stake has been diluted to 9%, but Greenland Minerals is relying on the Chinese firm to process any materials it extracts from Greenland, a technically challenging step that is key to the project’s viability.

The concession includes uranium deposits, which locals fear could be released into the area’s pristine natural landscape and farms. The project is also forecast to increase Greenland’s carbon-dioxide emissions by 45%.

Miles Guy, Greenland Minerals’ chief financial officer, said the firm had been on the verge of clearing the final hurdles in a yearslong regulatory marathon when the snap election was called. The firm has invested 130 million Australian dollars ($99 million) in the project.

“In our view it would be an extreme display of bad faith to suddenly reverse all that,” Mr. Guy said.

Aaja Chemnitz Larsen, a member of the Inuit Ataqatigiit, said the election result gave her party a strong mandate to oppose the mine. “It would be devastating for Greenland,” Ms. Larsen said.

At stake is Greenland’s path toward independence. The island is still partly governed by Denmark, which helms the country’s defense and foreign-affairs portfolio and gives Greenland an annual block grant of roughly 3.9 billion Danish krone ($623 million) to help fund basic services. Declaring complete independence from Denmark would require Greenland’s mainly Inuit population of 56,000 to find another source of income to compensate for the loss of that grant.

Mr. Guy said the Kvanefjeld project is expected to generate $200 million in annual tax revenue for Greenland’s government as well as hundreds of local jobs.

A decades-old defense treaty between Denmark and the U.S. gives the U.S. military virtually unlimited rights in the former Danish colony at Thule Air Base, the northernmost U.S. base, which houses part of a U.S. ballistic-missile early-warning system.

But in recent years, the U.S. has had to compete with China for influence on the North American island.

In 2016, a Chinese government-owned company tried to buy an abandoned naval base in Greenland; Denmark sent four sailors to live there and shoo away Chinese interest. In 2017, a Chinese state-owned university announced it would build a polar research antenna on the island; Greenland’s government said it hadn’t approved the proposal, or even heard about it, and the project stalled.

That same year, Greenland’s government flew to Beijing to meet with two Chinese state-owned banks to see if they would finance a new airport for the capital, Nuuk, whose tiny runway, carved into a snow-capped hillside, can receive only propeller planes. A larger airport, big enough to receive passenger jets, would help open up Greenland to tourism.

But China’s interest set off alarm in the Pentagon, which worried that if Greenland defaulted on the loans, the Chinese government could claim a strategic air strip just a few hours by flight from the U.S. eastern seaboard.

In 2018, Defense Secretary Jim Mattis lobbied the Danish government to intervene, The Wall Street Journal reported. Denmark’s government asked a consortium led by Danske Bank to help assemble an alternative financing package, which Greenland’s government ultimately accepted.

The Journal reported In 2019 that President Donald Trump had privately asked advisers whether the U.S. could buy Greenland, expressing interest in its abundant resources and geopolitical importance. Months later, a delegation from the White House National Security Council, the State Department and the Pentagon visited the island, whose government had roundly condemned President Trump’s offer to purchase their country. Last year, the U.S. opened a consulate in Nuuk.

Caught in the middle of the geopolitical maneuvering are the residents of fishing villages that dot Greenland’s southern coastline. Narsaq, a town of about 1,300, feared the environmental damage that the project could unleash. Uranium mining is a deeply polarizing issue in Greenland, whose 1988 ban on extracting radioactive materials was lifted in 2014 by a single vote in parliament.

Debates within the ruling party forced Prime Minister Kim Kielsen to relinquish a party chairmanship post last year. “This is, no doubt, the most controversial project in Greenland currently,” said Martin Breum, lead correspondent for the Arctic Journal and a longtime writer on Greenland’s internal politics. “We are talking about one of the largest [rare earth] deposits outside China.”

The election doesn’t totally foreclose the possibility of rare-earth mining in Greenland.

The IA party would be open to a referendum on the project, if any of its potential coalition partners insisted on one as a condition for joining the government, Ms. Larsen said: “A referendum is something that could be done.”

And the party isn’t opposed to the development of a second, more remote rare-earth deposit in the south of Greenland.

“It would be something that we definitely can look into,” Ms. Larsen said. “I think we would be much more open to the other project.”

Photo: Narsaq in southern Greenland, which is near the site of a rare-earths mine planned by Australian-listed company Greenland Minerals.
PHOTO: GREENLAND MINERALS/REUTERS

Link: https://www.wsj.com/articles/chinas-rare-earths-quest-upends-greenlands-government-11617807839?mod=trending_now_news_pos4