Written by Jichang Lulu.

2016 was an eventful year for China’s intensifying engagement with Greenland: A blocked attempt to buy a derelict naval base; controversy over the size of a state-linked company’s share in a uranium project; progress towards establishing the world’s northernmost mine. A year ago, no actual Chinese investment existed. Now money has changed hands, permits are being awarded and China is becoming a major player in Greenland’s development. That involvement is also starting to be received differently in Nuuk and Copenhagen.

First base

News about the failed attempt to purchase what is left of a naval base emerged in mid-December, first reported by journalist Christian Brøndum on the Danish-language website Defence Watch and soon covered by mainstream Greenlandic and Danish media. The base, named Grønnedal in Danish and Kangilinnguit in Greenlandic, was established by the US Navy in 1942 and taken over by Denmark in 1951. Its importance declined over time, resulting in its closure in 2014 and plans to sell it. Earlier this year. the Danish defence ministry stated that it was not interested in continuing to operate the base, and as late as June a comprehensive document on Arctic defence did not even mention it except as a point on a map. That made the language in an agreement between the major Danish political parties earlier this month rather remarkable: They agreed “to reestablish the Armed Forces’ presence in Grønnedal as a strategic and logistic base.”

The rediscovery of the strategic importance of the old base was allegedly a response to a Chinese company’s attempt to buy it and may have involved the intervention of the Danish PM, Lars Løkke Rasmussen. Greenland’s state-owned broadcaster KNR then identified the prospective buyer as General Nice, adding that the future of the base was being “reconsidered”. Greenlandic officials complained they were not aware of the reasons for the reassessment and only learnt about it from the media.

General Nice Group (俊安集团) is an iron trader controlled through a Hong Kong company. It has managed to reinvent itself several times, in constant attempts to diversify away from the Chinese coal and iron markets. Historically a private company that thrived in part thanks to Party connections, in recent years it has received increased state participation. I have written elsewhere about the company’s peculiar history, from its beginnings in the Shanxi coal rush to its fight for a manganese mine in Burkina Faso.

General Nice arrived in Greenland in early 2015, buying the mortal remains of London Mining, the owner of the Isua iron mine near Nuuk. Isua had been one of the island’s most promising projects, but a controversy over an influx of thousands of Chinese workers to develop it ended up causing a political crisis that took down a government. The bad publicity likely helped keep Chinese investors away from the project. Iron prices eventually collapsed, taking London Mining into administration. When General Nice bought the mine, reportedly for a pittance, Chinese industry sources called the investment “speculative” and agreed no one would develop that mine any time soon.

General Nice has been going through hard times. Company disclosures show stalled projects and losses in several of the Group’s companies. Last October, the company’s chairman and major shareholder, Cai Suixin 蔡穗新, received a court order preventing him from moving assets from Hong Kong, due to a dispute involving a Shanxi bank. Difficulties were already considerable when Isua was bought. The purchase can be seen as a long-term investment, to be cashed in if some day commodity prices make the mine a valuable asset. The company’s activities since the acquisition, however, suggest other motivations are more likely. Together with the Isua license, London Mining took over part of the Chinese team that was working to develop the mine for London Mining and their crucial contacts with Chinese geological research institutes and the Ministry of Land and Resources, the main driver of Chinese state and private interest in Greenland’s underground resources. General Nice staff have talked about plans to catalyse Chinese interest in Greenland and somehow help organise financing for Chinese mining investments there. That way, General Nice’s token ownership of an asset with historical significance for Sino-Greenlandic relations could grant it a disproportionate role in China’s plans for Greenland, and earn it brownie points with state companies at a time when its core businesses have uncertain prospects.

The bid for the Grønnedal base should probably be read in that context. A dismantled base plagued by environmental and administrative issues surely makes no sense as an asset for a beleaguered coal and iron miner. The only plausible motivation is that General Nice tried to buy the base reacting to a perceived or explicit interest for it from Chinese state entities.

The Danish and Greenlandic reactions are telling. Denmark needs to be seen as a stakeholder in Arctic defence, something that allows it to punch above its weight in its relations with major powers, including China. Greenlandic politics, on the other hand, is increasingly about declaring a wish to become independent, something unfeasible as long as the island relies on Danish subsidies. The prevailing view of successive Greenlandic administrations has been that the only way for the island to afford a state would be a mining boom fueled by Chinese investment. As a result, closer relations with China are a priority. While Chinese interest in Arctic defence is still muted, we should expect that if one day China really wanted to establish a base in Greenland, a Danish administration would recoil in horror, but an independent Greenland might at least consider the offer.

The mine at 83°N

One project with Chinese participation that is actually close to realisation is the Citronen Fjord zinc and lead deposit. Owned by Australia’s Ironbark and expected to involve an arm of China Nonferrous (中色), it has just received an exploitation permit. Although the partnership with China Nonferrous is based on a non-binding agreement, recent statements from Ironbark seem to indicate they rely on it for financing the project and starting construction in 2018. The agreement leaves construction and the bulk of the financing to the Chinese partner.

Most of the workers at the Citronen site would at first be foreigners (likely Chinese, if we assume a Chinese company will indeed build it). The permit and previous agreements, however, establish a goal to train and employ as many local employees as possible. The license states that some of the ores can be processed abroad, subject to the authorisation of the Greenland government.

If financing materialises and China Nonferrous does enter the project as expected, Citronen Fjord will become not just the world’s northernmost mine, but also its northernmost settlement. Citronen Fjord is located at 83°N, just 800 km from the North Pole.

Hot uranium

Arguably the most important development in Sino-Greenlandic affairs in 2016 came in September, when it emerged that a subsidiary of Shenghe Resources (盛和资源) was buying a stake in Greenland Minerals and Energy (GME), the Australian license-holder for the Kvanefjeld (Kuannersuit in Greenlandic) rare earth and uranium project in the south of the island. The purchase, completed in December, gives Shenghe a 12.5% stake in GME and allows it to appoint a non-executive director. Crucially, the agreement also mentions that Shenghe could increase its stake to 60% once the project obtains an exploitation permit. The 60% option, mentioned in a Chinese-language press release, spread from my blog to Danish and Greenlandic media, inducing a PR-hiccup when GME denied its existence. Greenland politicians protested, eventually leading to a GME clarification admitting a 60% non-binding purchase option was indeed there. That makes it two times this year that the Greenland government has learnt about a major development involving China through blogs and the media. GME even publically refused to provide the text of the agreement to the Greenlandic authorities, arguing they did not trust them not to leak it. Such an approach to privacy would hardly work with the Chinese government.

Kvanefjeld is one of the major rare-earth deposits outside China, and Shenghe’s (potentially controlling) stake fits into the company’s recent strategy of securing resources abroad. The project is also of crucial importance to Greenland, but it faces significant local opposition. The issue is not Chinese involvement, but uranium. Greenlandic opinion is divided on whether uranium mining should be allowed, and so is the current ruling coalition, a Große Koalition united by pro-independence views, yet paradoxically divided on the project with the biggest chance to help reduce dependence on Denmark. The current minister of natural resources, Múte Bourup Egede, is “against uranium mining”, in so many words. Which side of the uranium debate will eventually prevail remains hard to predict.

Shenghe’s largest shareholder is the Chengdu Institute for the Multipurpose Utilisation of Mineral Resources (中国地调局成都综合所, IMUMR), a geological research institution ultimately under the Ministry of Land and Resources. Other major shareholders are also state-linked, and state control of the company goes back to its beginnings in the early aughts. Shenghe’s actions in Greenland can be read as part of state-directed strategies concerning rare-earth assets abroad and Arctic resources. Specifically, information recently published by the IMUMR refers to the stake in Kvanefjeld as “implementing the vision on mining cooperation reached at the time of a meeting between minister of land and resources Jiang Daming 姜大明 and Greenland officials in 2015.”

The visible hand

Chinese investments abroad are sometimes described as either part of wide-ranging state strategies or purely commercially driven. Such a dichotomy (like the one between ‘state’ and ‘private’ enterprises) seldom makes sense. This applies to mining in Greenland as well. There is no evidence that everything China does in the Arctic is part of a grand strategy overseen by a specific state agency. The major projects that have attracted Chinese interest certainly make commercial sense. On the other hand, the major force driving that interest has been the Ministry of Land and Resources. The hand of the Chinese state becomes visible when a company declares an investment “implements a minister’s vision”, but it can still be guessed behind moves, like the bid for a naval base, with no more plausible motivation than earning the state’s favour.

Although voices in the Danish military have been warning against Chinese interests in the Arctic for years, Danish politicians have so far avoided openly countering either Beijing or Nuuk. Even the high-profile intervention to block the sale of the base was leaked rather than officially announced. Current and past Greenlandic officials have generally favoured closer ties to China, simply because they see it as the one major source of investment that could reduce dependence on Denmark. Chinese mining investors are constantly being sought. China is a major market for Greenlandic seafood, and some in Greenland would support allowing Chinese vessels to fish in Greenlandic waters. Infrastructure development has been the topic in little-publicised talks with Chinese companies. As China’s presence in Greenland crystallises, attempts to gain influence beyond just mining permits should naturally become more frequent.

Jichang Lulu is an independent researcher and writes frequently on China’s interests in the Arctic.