Investment Note: Greenland and the new game of Risk
As the world’s great and good gathered in snowy Switzerland for the annual World Economic Forum meetings in Davos, minds were focused on another icy part of the world: Greenland.
American President Trump insists that the world’s largest island, an autonomous part of Denmark, should join the US. Denmark and its European allies firmly said no. Trump in turn threatened tariffs on eight European countries for daring to disagree. The trade deal he personally signed with the European Union last year seemingly went out the window.
The recent US hostile takeover of Venezuela was unsettling enough (even though few will shed any tears for Nicolas Maduro, a tyrant who ran his country into the ground). However, threatening to take territory from a close ally is something else entirely. As Canadian Prime Minister Mark Carney noted at Davos, the international rules-based order is “in the midst of a rupture, not a transition” as Trump tears up the rule book. Quoting the ancient Athenian general and historian Thucydides, Carney said it means “the strong do what they can, and the weak suffer what they must” as the era of Great Power politics returns. Or as many social media memes implied, it resembles a version or Risk — the popular boardgame where players must build alliances or battle opponents to conquer territory on a world map where, incidentally, Greenland is shaded the same colour as the US.
Grass not greener
Economically speaking, Greenland is tiny, with a population of 55,000. While it appears to hold considerable mineral wealth, it is not clear how much of this can be commercially exploited. However, its importance increases as the melting of the Arctic ice sheet potentially opens a new maritime economy around the North Pole. The US already has a military presence on the island and its treaties with Denmark allow it to scale this up at any moment, suggesting that Trump’s obsession with Greenland seems to be more about his ego than US strategic interests. Expanding the surface area of the US by a quarter would be his ultimate real estate deal. However, it would come at the cost of the NATO alliance, thereby weakening the US in its competition with Russia and China, rather than strengthening it.
In the end, there was a collective sigh of relief when Trump too spoke at Davos and said there would be no military takeover of Greenland, though he reiterated his insistence that it should be part of the US and that he would not forget those who stood in his way. The reasons for Trump backing down probably have more to do with domestic politics than the niceties of international law. There is little appetite among ordinary Americans for this kind of imperialism. Opinion polls show broad opposition to acquiring Greenland, while several high-ranking Republican politicians spoke out against the idea, a rare rebuke of Trump. They know that mid-term elections are looming and people care about bread-and-butter issues, not foreign adventurism. More tariffs and counter tariffs would make things worse for voters, not better.
Despite Trump stepping back, for now at least, this episode will linger in the minds of European leaders and investors. The market response was telling.
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