Forget About the Arctic: Denmark Hardly Gains Anything from the Cold North
The Danish Prime Minster suddenly turns to the left as he hears an exuberant sound. A large melting chunk of ice gets loose from the massive mountain of glacier in Greenland and makes splashes as it hits the icy water. The sound is dominating, like a rain of high crashes.
However, it only takes a few seconds until the remaining mountain glacier stands still again, like nothing happened. The large splashes have calmed down and Lars Løkke Rasmussen turns around again. He would later tell reporters what a special experience it was to see the impact of climate
change in the Ilulissat area of Greenland, where he hosted the President of the European Council Donald Tusk with the Greenlandic home rule President Kim Kielsen in May 2016.
The politicians were officially there to look first hand at the impacts of climate change, that can make the Arctic Ocean ice-free within 40 years. But according to several experts, it was just as much to discuss politics.
When the ice melts and the glaciers disappear, the world will see a new ocean emerge, especially when the ice on the North Pole retreats. Denmark is becoming increasingly important for foreign politicians as the Danish Realm claims large parts of the Arctic Ocean, including the North Pole itself.
The former foreign minister Martin Lidegaard (R) told Politiken in 2014 that Denmark has a “long time strategy” in the Arctic Ocean, because it can hold important resources for future exploitation and because Denmark, by becoming an Arctic state, will be geopolitically important. His views have been shared by experts, who points at the Arctic potentially being militarily important, economically significant, and politically vital.
However, several experts point at difficulties of extracting resources such as oil and gas in the Arctic Ocean. Fossil fuels that are being increasingly pressured by a growing renewable energy sector. Furthermore, the claim of the Arctic by the Danish Realm is tied up to Greenland, and if Greenland becomes independent, what will then happen to the Danish interests in the Arctic Ocean? This article will explore the Danish interests in the Arctic.
The strategic interests
The Arctic region spans from the northern regions of Greenland, Russia, Canada, US, and Norway and continues all the way to the icy North Pole. In 2006, the United Nations Convention on the Law of the Sea was passed, giving states ten years to make claims for an extension of their continental shelf, enlarging their coastal borders. Denmark, Russia, Canada and Norway have all done that with the Danish Realm claiming an area of 895.000 square kilometer that overlaps with the demands of others.
The area, more than 20 times the size of Denmark, goes from the north of Greenland, past the North Pole, and all the way to Russia’s maritime borders.
According to a new study named “Grønlandskortet”, Denmark benefit in its relationship to the U.S., because it controls the Greenlandic foreign policy. It adds a political and military dimension, explains assistant professor Jon Rahbek-Clemmensen from Syddansk University, which will be enlarged with the Danish Realms claims of the Arctic Ocean, he says.
“It makes Denmark strategically important. It will give Denmark access to politicians and create an understanding of Denmark,” Jon Rahbek-Clemmensen, expert in Danish and Greenlandic Arctic politics and author of “Grønlandskortet”, explains and points out that it gives Denmark a larger role in international politics than otherwise.
Big oil and gas prospects
According to the U.S. Geological Survey from 2009, 25 percent of the world’s undiscovered oil and gas is hidden within the Arctic region, and it is estimated that the region holds other minerals. However, today, the raw materials being extracted from within the Arctic region happens on land or very close to shore. Far away from the claims of the Danish Realm.
The large estimated resources have gotten the attention of large oil companies. Within the American border and the outskirts of the Arctic region, Shell started drilling for oil in 2015 in the Alaska Chukchi Sea. However, later the same year, the company had to suspend its drilling,
because it did not find sufficient oil and gas, it was told. According to reports from the news site Bloomberg, mistaken geology, fear of oil prices, and environmental pressure all lead to the closure. Those difficulties are characteristic for the Arctic, Jens Bo Holm-Nielsen, associate professor in the department of Energy Technology in Aalborg University, explains.
“The problem is that you will need a price of more than $100 to make money in the Arctic,” said Jens Bo Holm-Nielsen, “Now that the oil prices have dropped, I believe that the Arctic oil and gas will stay in the ground for good.”
The price for a barrel of oil on today’s market is around $50, and even though it is hard to predict future oil prices, the associate professor does not expect it to become economically favorable to extract anytime soon.
According to a report by UK company service company Deloitte, the average production cost of Arctic crude oil is $75 per barrel. However, projects further north, where Denmark claims territory, the prices will be much higher.
“There are some big technological difficulties. For example, the depths are deep in these areas, and you will have to drill down to areas with ice,” said Jens Bo Holm-Nielsen, “You will need a new type of modern technology with new platforms, underwater stations and so on.”
Even though, technological difficulties normally get solved over time, there are other reasons for why the Danish Realm should not have too much hope for oil and gas in its claimed part of the Arctic.
The green wave hits
The reason for that is not oil itself. It’s the competition. Renewable energy is on the march forward. According to the latest Global Status Report on Renewables from 2016, the global capacity of renewable energy rose with 8.7 percent in 2015, even though the oil price was below $40 per barrel that year.
And according to the organization IRENA, the prize of renewables is decreasing rapidly with electricity costs from solar cells coming down 58 percent from 2010 to 2015.
In the US, studies by the Berkeley Lab and the agency EIA show that wind and solar can be cheaper than fossil fuels for energy production. Solar energy can be as cheap as 21 øre/kWh, wind as cheap down to 16.5 øre/kWh, while fossil fuels for production of energy costs 25.7 øre/kWh.
“So, in 50 years, the gradually implementation of green energy solutions will be so advantaged that we will not need oil and gas in notable amounts,” said Jens Bo Holm-Nielsen, who is supported by researcher Arild Moe from the Fridtjof Nansens Institut in Norway.
“It is certain, that there is no direct economic interest in the Arctic,” said Arild Moe, who specializes in Arctic politics and oil, and points to Shell drillings in Alaska as an example.
Shell, who had years of delay because of law suits, lost $7 billion on its closed drilling and met fierce resistance from environmental groups along the way.
“There is definitely an image problem for companies like Shell. After so large investments, the company concluded that it was too uncertain and they had to get out,” said Arild Moe and concludes that environmental pressure and worries of the company’s image played a part.
In 2017, the CEO of Shell Ben van Beurden acknowledged that the sector faces problems in the public sphere.
“If we are not careful, broader public support for the sector will wane… The fact that societal acceptance of the energy system as we have it is just disappearing,” said Ben van Beurden at a CERAWeek conference in Houston this year.
The Danish Realm’s hope to extract fossil fuels such as oil and gas in the
Arctic therefore seems unlikely. However, in Greenland, the subsoil hides several minerals such as zinc, lead, gold, Iron, quartz and robins, according to the book ‘Mineral Resources’ by the Geological Survey of Norway. It could therefore be possible that the claim in the Arctic Ocean by the Danish Realm could hold the same and be favorable to extract in the future.
However, according to the book ‘What holds the Arctic together’, published by Arctic experts, “95% of the hydrocarbon deposits and almost all of the mineral deposits are probably located in the Exclusive Economic Zones”. In other words, within states already existing maritime borders in the Arctic.
Greenland the rightful owner
Even though minerals should be found in the Arctic Ocean, it will not be for the benefit of Denmark. In 2009, Greenland got home rule, which transferred the rights to extract resources from the subsoil in Greenland to Greenland. In the law of Greenland’s home rule, it says that if Greenland gain profit from raw materials activities “the state’s (Denmark) subsidy to the home rule will be reduced by an amount equal to half of those profits…”. That arrangement will continue until the Danish block grant reaches zero, and if that happens, a new deal is supposed to be made, but it will, however, result in Greenland claiming independence in accordance with the home rule law, according to Ulrik Gad, Greenland expert and associate professor at Aalborg University.
“Greenland will claim independence if they can become economically independent by for example combining mining, tourism and fishery,” said Ulrik Gad, “No doubt about that.” But how does that influence the Arctic Ocean claim? The claim of the Arctic by the Danish Realm is tied up the justification that the Greenlandic continental shelf reaches out to the North Pole. Therefore, the Arctic claimed by the Danish Realm falls under the law of Greenlandic home rule and will become part of Greenland in the case that they become independent. “In that case, Denmark will be left with nothing. Absolutely nothing,” said assistant professor Jon Rahbek-Clemmensen.
The Danish economic gain from the Arctic can therefore maximum be the Danish block grant of 3.7 billion Danish kroner a year. In contrast, the North Sea brought 18.8 billion to Denmark in 2014, according to the Danish Energy Agency. The Danish economic interests are therefore limited. If there are substantial raw materials to extract, Greenland will call for independence and Denmark gain hardly anything in the Arctic Ocean.
It extends to the potential symbolic, political and military advantages that Denmark could get in the Arctic, because Greenlandic independence will give them control of own foreign policy. However, how likely is it that to happen?
Independence only moving forward
Not very likely right now, according to economic professor Torben Andersen from Aarhus University, chairman of the Economic Council for Greenland. For Greenland to be economic independent, it would need substantial profits from raw materials as the current main income from tourism and fishery have limited growth potential.
“It is not impossible, but it will take years. Mining would need to create employment and commercial development in Greenland for it to have a real impact,” said Torben Andersen.
According to the 2014 report ‘Til Gavn for Grønland’, Greenland would need large scale mining projects to create enough wealth to become independent. Something, the report concludes is unlikely at the moment.
However, in Greenland, the political standpoint continues to be moving towards independence. In 2016, independence became an official task for the government in Nuuk, working for a Greenlandic constitution.
In a 2016 survey by HS Analyse, 64 percent of the Greenlandic people asked saw independence from Denmark as an important task. 24 percent did not.
“In the political debate, no political party are saying the fight for independence should stop,” said associate professor Ulrik Gad.
He sees two main political debates going on in Greenland. The first being that the Greenlandic politicians see Denmark as being arrogant, talking to them as children. Secondly, the Greenlandic politicians see Denmark as not taking good enough care of the Greenlandic interests.
He is therefore not in doubt that Greenland will become independent if they can get economic self-sufficient, he said. “Greenland will become independent one day, but what kind of independence it will be is the real question,” said Ulrik Gad, who see two scenarios.
A populist movement: One way, where Greenland become economic independent, and one, where populist movements in Denmark and Greenland push towards political exasperation, leading to independence without economic certainty.
It’s because people in Greenland can be divided into two main groups, Cecile Pelaudeix, associate professor at Aarhus University and at Ilisimatusarfik in Nuuk, explains. A group that wants to grow business and push for economic independence and another where the wish for independence tops everything else. Something that are historically rooted to the colonial past, the associate professor tells.
“Most likely, we will see an arrangement being made in the next one of two decades, but it can be everything from a permanent to a temporary deal,” Ulrik Gad explains.
What that means for Denmark and the Arctic is hard to tell, but with around 50,000 inhabitants, Greenland would need some help from outside, Ulrik Gad points out. That could be Denmark, but does not have to.
“It could also be the Americans, Canadians or Icelandic’s, who will help Greenland. The future is unclear,” said Jon Rahbek-Clemmensen.
It could therefore be possible that Denmark could keep some of the political and strategic advantages from the Arctic Ocean, even though Greenland becomes independent. However, the Danish justification for claiming the Arctic remain fuggy. The economic interests are limited, the strategic and the political interests are uncertain in the long run.
As Lars Løkke Rasmussen stands and looks at the melting glacier in Ilulissat, Greenland, the degrading ice could as well be a symbol of the degrading gains of Denmark in the cold Arctic Ocean.