Debate | Opinion
If Greece continues to move towards independence, the cash-strapped territory is likely to fall prey to Chinese investments seeking to gain influence.
The victory of the Inuit Ataqatigiit (IA) party in the general elections of Greenland in April 2021 was seen by many as a blow to the Kvanefjeld mining project in southern Greenland, and more broadly representative of a further decline in the territory. Autonomous rich in energy against the exploitation of rare earths. projects that contribute to environmental damage. There has been growing international interest in Greenland’s resources, particularly iron ore, lead, zinc, diamonds, gold, copper, uranium and petroleum.
But the left-wing IA party is also something else – a movement towards greater autonomy from Denmark, with the ultimate goal of full independence. However, Greenland cannot go it alone. The island constituency risks falling victim to debt trap diplomacy over Chinese investments in the Polar Silk Road if Greenland is unable to raise sufficient funds from liberal partners.
Consider the controversy over funding the Nuuk airport expansion. When Denmark opened investment negotiations, a Chinese investment company – the Chinese Communication Construction Company (CCCC) – stepped in and offered to finance the construction of the entire project. In the final stage of negotiations, Denmark said Chinese investments pose a security risk and agreed to pay 33% of the total construction bill ($ 109 million). The CCCC abandoned its offer following this announcement.
While Denmark’s decision to reject Chinese funding for Greenland’s new airports was a wise one, could an independent Greenland resist the offer?
As a dependent territory with the right to self-determination and with a majority in favor of independence, only one thing stands in the way of Greenland: financial support. With a majority of Greenland’s GDP funded by a Danish block grant of DKK 3.9 billion ($ 614 million), a successful independence movement remains on hold, but for how long? Although Denmark struggles to keep the Arctic island, the independence movement continues to grow. Greenland could become independent as soon as possible, and its independence will have ramifications for the whole world.
A newly independent, cash-strapped Greenland is at high risk of falling prey to Chinese investment seeking to influence its political positions, often referred to as “debt trap diplomacy.” Debt trap diplomacy is a tactic used by the Chinese government to gain political or economic concessions from low-income countries by overstretching infrastructure loans which then prove impossible to repay on time. China is now the world’s largest global creditor.
These investments seem ideal for countries that might have difficulty obtaining financing otherwise, providing developing countries with the means to build the necessary infrastructure while avoiding the policy prescriptions associated with lending from the International Monetary Fund (IMF) or the Bank. global.
However, these loans are then due not to international organizations operating under public responsibility, but directly to the Chinese government. Without transparent methods of debt relief, if and when these countries default on their loans, they remain indebted to China and politically weak to resist potential demands for strategic resources or diplomatic support.
Take Sri Lanka and Djibouti, both of which received project investments from China that left them heavily in debt. In 2017, Sri Lanka defaulted on its loans with China and offered its strategic port of Hambantota in exchange for debt cancellation. Djibouti, in an effort to offset its debt to China, is now home to China’s only military base abroad.
Greenland’s domestic funding highlights broader issues: the implications of independence in the rapidly changing arctic arena, the rising costs of climate change mitigation, and the need for more regulation. strict in the ever-expanding FDI sector.
Having lost nearly 3.8 trillion tonnes of ice over the past 30 years and having experienced rains on the summit of the Greenland ice sheet for the first time in history, a newly independent Greenland can expect to do so. facing new funding challenges beyond resource extraction. Managing the costs of mitigating climate change and emerging risks, tourism, competition from the great powers, greater activity on the Northern Sea Route and the increase in military operations taking place in the Arctic pose all unique challenges to the region.
Naalakkersuisut, the Greenlandic government, must remain cautious about the growing risk of Greenland’s debt trap diplomacy, especially as it bears the brunt of climate change, security and a further global energy crisis. additionally viewed with the Arctic in mind. Clear political guidelines on the regulation of foreign direct investment are due soon – policies that underpin Greenland’s rules-based governance framework and reaffirm relations with liberal partners.
Otherwise, debt trap diplomacy could simply wait on the ice before warming up to the thaw and working in Greenlandic negotiations, freeing up security interests essential to liberal arctic law enforcement.