A Tricky Proposition
The US President, along with his team, reportedly discussed the prospect of purchasing Greenland, which brought up some complications. Historical references
like the US's $15-million purchase of Louisiana in 1803 and the $7.2-million acquisition of Alaska from Russia in 1867, aren't helpful in this situation. Greenland's fishing-based Gross Domestic Product (GDP) was valued at a mere $3.6 billion in 2023, a tenth of its Arctic neighbor Iceland's. Moreover, Greenland's ban on oil and natural gas extraction for environmental reasons complicates valuation, along with mining sector difficulties due to opposition from Indigenous people. A valuation method based on the income a target is capable of generating is also tricky. This raises the question of how to assign a meaningful price tag to an autonomous territory such as Greenland.
Valuation Challenges Emerge
Several factors impede assigning a monetary value to Greenland. The island's Indigenous population and their ownership claims, add complexity. There's no accepted framework for valuing countries, as noted by an economist from ABN AMRO bank. The fact that the Danish government covers about half of Greenland's public budget, funding hospitals, schools, and infrastructure, must also be considered. In 1946, the US offered to buy Greenland for $100 million, which was rejected. Estimates suggest the value of Greenland's mineral and energy reserves could reach hundreds of billions of dollars or more. However, complete geological studies of the entire island haven't been done yet. A 2023 survey revealed that 25 of 34 minerals deemed “critical raw materials” by the European Commission are present on the island. Comparing Greenland's value to historical benchmarks is also challenging.
Political & Strategic Angles
One potential outcome could involve a settlement that the US perceives as advantageous for its military and economic interests. As ABN AMRO's Kounis suggested, the US President could be using a similar strategy to those used in trade tariff negotiations, where an extreme scenario is presented to soften the other side. The Trump administration has stated that all options are open, including military action, to gain control of a territory it sees as crucial for US national security, where a small military presence already exists. That 1946 offer of $100 million would equal around $1.6 billion in today's money. However, this figure is an insufficient baseline, as it doesn't reflect the significant economic growth over the past eight decades and the value of Greenland and its resources in the modern global economy. Moreover, Reuters reported that the administration held discussions about taking a stake in a company aiming to build a rare earths project there.
Intangibles & Considerations
According to the Research Director for Arctic and Ocean Politics at the Fridtjof Nansen Institute, it's impossible to price Greenland due to the intangible aspects like Indigenous peoples' culture and history. Therefore, the very idea of putting a price on it is “ridiculous”. Determining the real value would rely on inflation, appreciation in land prices, and the growth of local economies. The situation is further complicated by the fact that France and Russia chose to sell. Mining and energy deals don't typically involve the transfer of national sovereignty, and Greenland's situation includes the presence of the Inuit people, who have their own ownership claims. Ultimately, the hypothetical sale of Greenland faces numerous obstacles when trying to establish a fair and accurate price.
