GREENLAND : Economy
Greenland’s GDP stands at a little over 2 billion dollars. The rate of growth is 1.6% and the rate of unemployment is just over 9.4%. It is also estimated that 9% of the population lives below the poverty threshold. Despite its recent enhanced autonomy status, Greenland is in a situation of heavy economic dependence on Denmark, which with subsidies from the European Union and the United States provides more than half of the State budget. Denmark’s financial support should nevertheless be set in context as its annual contribution of 500 million euros represents less than 1% of its national budget. (See Chapter on current issues)
Under the current enhanced autonomy status, the Greenland government is responsible for central administration (education, health, fisheries, environment, etc.) under the leadership of a prime minister. Certain spheres still fall under Danish authority, however: justice and police, defence and national security, the financial and monetary sectors, civil law (family and inheritance) and foreign affairs.
Greenland, in view of its geography and its climate, cannot count on a great diversification of the sectors of economic development. There are 4 main sectors today.
Fishing
Greenland’s economy is heavily dependent on fishing, which accounts for 90% of the country’s exports and 25% of GDP. 88% of production is earmarked for export, mainly to the Unites States, the Asian market, Russia and Europe. Fishing was developed intensively in the 1970s, the Inuit having previously been above all marine mammal hunters for hundreds of years. Successive governments developed two types of fishing
Firstly, industrial fishing, dominated by the state company, Royal Greenland, and the private company, Polar Seafood, in deep waters, focuses on prawns and shrimps and the Greenland halibut has replaced the cod, fished intensively over the past three decades. The fleet includes 300 small trawlers and 25 large trawlers flying under Norwegian, Chinese and Greenland flags. Then there is coastal fishing, which provides the most work and subsistence resources for villagers along the West coast. Due to the fact that it is a subsistence activity, the authorities take care to protect "small-scale fishing" by the 5,000 or so registered small boats which contribute 15% of total production.
Natural resources
The minerals : As the ice sheet recedes, it exposes new exploitable land. In the past, many mines in the immediate proximity of the coast had worked to extract different metals (cryolite at Iivittuut; coal at Qullissat; marble, zinc, lead and silver at Maarmorilik; zinc, molybdenum and lead in Mesters Vig Bay) but gradually began to shut down in the 1990s, causing a deficit in the Greenland balance of trade. The closure also caused a substantial loss of jobs for many Greenlanders, who were unable to find any opportunities for retraining.
Since 2009, successive Greenland governments had counted on new, more rapid growth of the mining industry. In the course of a few years, the number of concessions granted has considerably increased, to the benefit of multinationals, often American and Australian. So, certain projects have begun, such as the project for extracting rubies and sapphires from Aappaluttoq, in the southwest of the island, iron to the northeast of the capital, and more worryingly from an ecological point of view, uranium in the south of the country, in the region of Narsaq. Greenland could hold around 13% of world uranium reserves. While all of the main political parties say they are in favour of developing the mining industry, the Inuit Ataqatigiit party opposes it on environmental grounds and today is seeking a people’s referendum on its exploitation. According to the polls, most of the population advocate economic development and say they are in favour of mining, but are opposed to uranium extraction. Developing uranium mining would mean putting an end to the principle of "zero tolerance" for exploitation of this mineral, a decision taken by Denmark 30 years ago.
Rare-earth deposits: In southern Greenland, in Kyanefield and Kringlerne, a particularly large deposit of rare-earth minerals has been found. It is a material that has become essential to the new technologies, notably mobile phones, precision electronic equipment for medical or military purposes, and renewable forms of energy. The country is thought to hold 12 to 25% of world reserves. However, the big rare-earth extraction projects are being called into question for two main reasons. Firstly, the recent decision by China – which has 90% of the sites in the world currently being worked – to lift its export quotas, thus diminishing interest in opening mines in other countries. Then there are also ecological consequences because the rare-earth deposits are very often located in the immediate proximity of uranium, mining of which is still very expensive and is not without environmental risk.
Oil: Greenland could hold 23% of the world’s oil reserves, mainly off-shore. While the big groups rushed to start up borehole exploration around a decade ago, three of them decided to give up their exploration permits for western Greenland in 2015, despite the Greenland government’s tempting offer to extend their permits for free. There are three main reasons for this turnaround:
Firstly, the companies cited disappointing results from their explorations. The British giant, Cairn Energy, did not manage to discover sufficient volumes of oil to trade after spending a billion dollars on a two-year exploration programme. International events and a general fall in raw goods prices have also discouraged foreign companies from making large new investments in the oil sector. World reserves are at a peak and demand is gradually falling. In the wake of opportunities for transition to other forms of energy and under growing pressure of public opinion, investors are turning increasingly to renewable forms of energy. In a current scenario in which oil prices do not suddenly rise, it would certainly take several decades before Greenland could depend on any hypothetical oil revenue. An agreement with Denmark furthermore makes provision for the first 550 million kroner earned annually by Greenland to be divided equally between them. Finally, off-shore oil exploration in the polar regions entails major safety risks, notably in the field of storage and shipping of the crude. Following the Exxon-Valdez accident in 1989 and more recently the series of incidents in the Beaufort and Chukchi seas in Alaska, the oil companies are now subject to safety standards and guarantees that they struggle to honour. Paradoxically, the climate change that is freeing the sea from ice is also releasing growing numbers of giant-sized icebergs which pose a threat to the oil platforms.
Hydroelectric power: Today Greenland has a great potential for hydroelectric power that is still largely untapped, although there is a tendency towards a marked increase as the glaciers melt. Hydroelectric power already accounts for the majority of local electric production, but only features in second place in terms of energy consumption, a long way behind imported gas and oil, with a very costly environmental impact.