Low-Energy Fridays: Are Greenland’s resources a potential boon to the United States?

Greenland has emerged as a hot topic amid President Donald J. Trump’s growing emphasis on its strategic importance to the United States. This has yielded serious national security-focused debates on the issue, with many pros and cons; however, this piece focuses on the other reason some argue for U.S. ownership of the island: its natural resources.

Greenland is a veritable treasure trove of natural resources, including many critical minerals the United States is desperate to acquire through non-Chinese suppliers. But Greenland’s laws largely impede their extraction, which begs the question: Could Trump’s actions change this? The truth is that physical access to natural resources alone does not remedy scarcity—it’s the willingness of investors to undertake risk and build the necessary infrastructure that’s more important.

There’s an interesting paradox in economics known as the “resource curse.” Simply put, areas with abundant natural resources tend to be poorer than those that face scarcity. Competing theories attempt to explain the resource curse, but one generally accepted explanation is that these resource-rich countries usually have authoritarian governments while citizens under democracies fare better. A simpler theory is that, as the old saying goes, necessity is the mother of invention. Scarcity creates a need for innovation that drives improvements in productivity. Without it, there’s less need for innovation—and productivity can fall behind.

The point here is that access to resources does not guarantee economic benefit. To reap the full economic potential of natural resources requires significant capital investments in extraction and a vibrant free-market economy that can effectively utilize the produced resources. A rapid lesson of this variety has presented itself in the wake of the United States’ recent capture of Venezuela’s dictator, Nicolás Maduro. The Trump administration’s subsequent efforts to encourage U.S. investment in Venezuelan oil infrastructure have fallen flat because, while American oil companies theoretically have unfettered access to the world’s largest oil reserves, most view them as too risky and “uninvestable.”

Returning to Greenland, to the extent that natural resources are an issue of contention, policymakers should appreciate that actions that exacerbate risk are antithetical to investment—not just on the extraction side, but on the consumption side as well. Who wants to build a business that relies upon an industrial supply chain that may or may not be available in five years?

This isn’t just theory; it’s been empirically analyzed. Regardless of its source, conflict diminishes investment. There are many rationales for why conflict can weaken investment (e.g., institutional decay, risk of violence, weakened markets), but the consistently observed effect on investment from conflict is negative.

From a policy perspective, resource justification for interventions—particularly military ones—tend to carry more risk than reward. This is partly because investors have competing opportunities that offer lower risk and better returns. Governments focused on the need for “critical” resources may get tunnel vision when considering apparent solutions to scarcity, but ultimately, garnering investment confidence is more important.

So yes, Greenland has abundant natural resources that could be a boon for the United States and other customers if given access. But those benefits can only be realized when businesses have confidence in the stability and long-term opportunities of an investment. Rising tensions and uncertainty erode investor confidence, weakening a resource justification for the United States pursuing “ownership” of Greenland.