海角大神

Western policymakers are becoming increasingly anxious about China鈥檚 foothold into Greenland, particularly its desire to produce the semi-autonomous island鈥檚 rare earth metals 鈥� the materials used in high-end electronics, from smart phones and smart bombs to clean energy technologies, including wind turbines and advanced batteries. But policymakers can rest assured that there is more to China鈥檚 foray into Greenland than meets the eye 鈥� and not as much cause for concern.

A Thawing Frontier

Greenland鈥檚 icy frontier is transforming before our eyes. Climate change is contributing to a hastened retreat of the island鈥檚 massive ice sheet and ushering in new opportunities for the 57,000 people living in the northern hinterlands.

The island鈥檚 extractive industries are poised to be the biggest winner, as the thawed ice reveals new deposits of raw materials, everything from iron ore to aluminum.聽(Read More:聽)

Rare earths are the big prize. The small town of Narsaq sits near聽. According to Greenland Minerals and Energy Ltd, one of the island鈥檚 leading mineral development companies, that deposit could contain about聽, equivalent to about 10 percent of the known global reserves (which today total聽, according to the U.S. Geological Survey).听

China is making a play for those resources, apparently, courting the government with infrastructure projects and other investments that are intended largely to help Chinese companies acquire the production rights to mineral deposits, including rare earths.

Rare Earth Dominance

Western officials are particularly concerned about China鈥檚 potential control over Greenland鈥檚 rare earths. Driving this angst is the fact that China has a near monopoly on the global rare earths market already (it produces about 97 percent of the world鈥檚 rare earths 鈥� even though it only holds about 50 percent of the known global reserves) and that Beijing limits rare earth exports to help satisfy its own domestic demand.

It is difficult to overstate that a steady global supply of rare earths is important. After all, these metals are critical to advanced technologies and have few 鈥� if any 鈥� reliable manufacturing substitutes. (Some technologies can substitute rare earths, but they do not have the same effective properties.)聽Consequently, China鈥檚 outsized share of the global market gives it some leverage over others, which it has used before for geopolitical gain.

Indeed, policymakers have fresh memories of聽聽when the two countries were locked in a bitter maritime dispute in the East China Sea. While officials in Beijing claim they never sanctioned an embargo on rare earth exports, Chinese customs officials are reported to have prevented them from being loaded onto Japanese-bound freighters. Naturally, U.S. and other Western officials are concerned that China鈥檚 control of Greenland鈥檚 rare earths would only add to its sizeable share of the rare earths market and its ability to exert geopolitical pressure on those countries dependent on Chinese rare earths.聽(Read More:聽)

But how worried should Western officials be about China鈥檚 potential monopoly on Greenland鈥檚 rare earths? A couple of points are worth mentioning that should help allay concerns.

First, China鈥檚 share of the rare earth market is in relative decline.聽Sure, China produces 97 percent of the world鈥檚 rare earth resources. But the United States has ample reserves as well; we are just not producing them 鈥� yet.

According to the U.S. Geological Survey, the United States holds about 13 million metric tons of rare earths, or about 12 percent of the known global reserves. The United States used to produce these minerals too. Yet when U.S. states adopted more rigorous environmental standards to protect local watersheds and the surrounding environment, U.S. producers found it much more difficult to compete with cheaper Chinese metals that did not need to follow the same production guidelines. So U.S. producers stopped extracting them.

But that is starting to change as prices rise, allowing U.S. producers to compete with Chinese industry. One of the largest U.S. mines is in Mountain Pass, California, where聽聽is leading an effort to kick start production there. Meanwhile, Australia and Malaysia are planning projects to ramp up production of their known reserves as well. Other countries are likely to follow suit, including India and other states in Central Asia. Naturally, all these efforts will help diversify the market. So even if China secures the rights to Greenland鈥檚 rare earth metals, the market is already becoming more diverse, and there is little cause for concern that China will continue to monopolize the industry.

Second, China鈥檚 drive to develop Greenland鈥檚 rare earths may be driven more by its economic than geopolitical interests.聽Chinese production of rare earth elements appears to be in decline 鈥� particularly heavy rare earths that are used in advanced technologies. Naturally, Chinese industry leaders appear to be seeking to diversify their resource base. After all, global demand for these metals is on the rise and there are profits to be reaped from China sustaining its place as a major producer of rare earths. Greenland鈥檚 rare earth deposits present an opportunity for it to expand its sources of these minerals.聽(Read More:聽)

Moreover, there is really little incentive for officials in Beijing to wield the country鈥檚 rare earth industry for geopolitical gains. China鈥檚 2010 embargo against Japan is more likely a one off event than the beginning of a pattern of behavior. After all, sparking a trade war with the West is not in Beijing鈥檚 interest. In fact, it was largely this incident in the first place that stoked Western concerns and kicked start growth in non-Chinese rare earth production.

Finally, China鈥檚 path to the Arctic runs through Greenland.聽Developing Greenland鈥檚 rare earth reserves may not offer any potent geopolitical benefits. But Greenland is footsteps from the Arctic, and officials in Beijing may be betting that Greenland can be China鈥檚 entrance to the top of the world. In that vein, developing the island鈥檚 rare earths and other minerals may just be a means to an end. Indeed, royalties and taxes from producing those raw materials, in addition to the other Chinese infrastructure projects, seem to already be helping China鈥檚 Arctic cause. For example, Beijing is seeking聽聽鈥� the region鈥檚 intergovernmental forum 鈥� and Greenland has come out in strong support of its bid. If China is successful in getting observer status on the Council, Beijing would have stronger influence in shaping Arctic governance, including how to manage the region鈥檚 natural resource wealth.

But when it comes to China鈥檚 interest in Greenland鈥檚 rare earths, Beijing is acting more like a businessman than a boogeyman. So folks, a deep breath is in order. If Beijing does manage to acquire the exclusive rights to develop Greenland鈥檚 rare earths, don鈥檛 expect the geopolitical balance to go out of whack quite that easy.

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