Hidden among the mountains reflected in the icy waters of the bay of Narsaq, in southern Greenland, lies one of the largest reserves of rare earths and uranium on the planet. This deposit, known as Kvanefjeld (or Kuannersuit in the Greenlandic language), could be worth around 7.5 billion dollars, attracting the interest of the world's major powers, engaged in a race to secure the mineral resources strategic to the energy transition.

The left-wing environmentalist party Inuit Ataqatigiit (Inuit Community), which has governed Greenland until now, has firmly opposed the project and, as a result, the company has filed a complaint against the island, seeking 11 billion dollars in compensation.

Greenland goes to the polls: what has changed

Meanwhile, the political "wind" in Greenland has shifted. In the parliamentary elections of 11 March 2025 in Greenland, the centre-right opposition party, the Democrats (Demokraatit), achieved a surprising victory, tripling its seats and becoming the most represented party in the Inatsisartut, the Greenlandic parliament. The Democrats' leader, Jens-Frederik Nielsen, expressed his willingness to form a coalition and work towards national unity.

The pro-independence party Naleraq doubled its seats, becoming the country's second political force. The historic parties, Inuit Ataqatigiit and Siumut, left-wing parties that have governed Greenland for decades, suffered a significant defeat, losing nearly half of their seats.

The election result marks a turning point in Greenlandic politics and could accelerate the island's path towards greater autonomy. The Democrats have said they are in favour of a referendum on independence, but only after securing solid economic foundations. Currently, Greenland depends on an annual subsidy of 580 million euros from Denmark, which covers roughly half of the national budget and for which no clear alternative yet exists. In this context, mineral extractivism would represent a logical temptation.

The fear of radioactive contamination

When in 2007 the Australian company Greenland Minerals – now rebranded as Energy Transition Minerals (Etm) – acquired the mining site, the idea of a 7.5 billion dollar open-pit mine gave some people hope for a future of economic prosperity for the island. But for the residents of Narsaq, a community of just over 1,300 people, the project raised deep concerns: the extraction of rare earths would have involved the disposal of radioactive sludge near the town centre and local farms, with the risk of contaminating drinking water and damaging sheep farming, one of the region's main sources of livelihood.

The concerns of Narsaq's residents are not unfounded. Greenland has already paid a heavy price for mining activity. The lead and zinc extraction sites developed in the 1970s remain contaminated, with traces of heavy metals still present in fish, shellfish and surrounding waters. Furthermore, the ecosystem of Narsaq and the island's southern area depends on fishing and the hunting of seals and whales, activities that are fundamental to the survival of the Inuit.

The referendum on the fate of uranium

In 2021 the issue of uranium mines became a central theme in the Greenlandic election campaign, so much so that the international press dubbed the vote the "uranium referendum". The left-wing party Inuit Ataqatigiit won that year on the strength of firm opposition to the Kvanefjeld project, accused of putting the environment and public health at risk. Once in government, the new administration imposed a ban on uranium extraction, effectively blocking the mine.

But the decision triggered a reaction from Etm, which launched an international arbitration procedure against the Greenlandic government. The company argues that the ban constitutes a case of unlawful expropriation and has demanded compensation of up to 11.5 billion dollars (nearly 10 times the country's annual budget). To pursue the legal battle, Etm has secured financial backing from external investors, who will receive a percentage of any eventual compensation.

The risks for Greenland's future

The dispute between Greenland and Etm is handled through the Investor-State Dispute Settlement (Isds) system, a little-known legal mechanism that allows companies to sue states when laws or regulations put their investments at risk. In recent years, Isds has been increasingly used to challenge environmental regulations, placing governments before the dilemma of protecting ecosystems versus the risk of billion-dollar compensation payouts to private entities.

According to an investigation by the British newspaper The Guardian, since 1976 companies have obtained compensation totalling more than 100 billion dollars through Isds arbitrations, often to offset lost profits arising from the cancellation of high-impact projects. In the case of Kvanefjeld, Etm claims to have invested more than 7.5 billion dollars in developing the site, in the belief that it would be able to exploit it on an industrial scale. The compensation claim includes not only costs already incurred, but also future lost earnings.

The outcome of the dispute could have implications of global reach. A ruling in favour of the mining company would set a dangerous precedent for other governments seeking to impose environmental restrictions on extraction projects. Such a decision would make the ecological transition even more arduous, jeopardising states' ability to protect their ecosystems and public health without incurring unsustainable economic penalties.

The risk of having to pay 11 billion dollars in compensation would deal a severe blow to Greenland's economy, still heavily dependent on Danish funding. Although the new government has not yet pronounced itself on the matter, accepting Etm's demands could push Greenland to bank on the exploitation of its natural resources. Rare minerals, essential for the production of green technologies such as wind turbines and electric vehicle batteries, are at the centre of a global competition among the major powers, and Greenland could become a key player in this geopolitical scenario. The choices of the new government will be decisive for the island's future, especially for its local communities, which are the most exposed to the socio-environmental impacts that will follow.