COPENHAGEN (Reuters) - Chinese President Hu Jintao’s three-day visit to Denmark may ostensibly have been about signing billions worth of business deals, but a stake in Greenland’s huge mineral wealth may have been the elephant in the room.
Greenland, a self-governing dependency of Denmark, has some of the world’s biggest deposits of rare earth elements, strategically important metals in which China has a near monopoly. The north Atlantic island is also situated next to sea lanes that are increasingly important as the Arctic melts, and Washington has an air base in the northwest of the territory.
That may explain why the leader of the world’s most populous country decided to devote three days to visiting Denmark, a nation of just 5.6 million.
“He didn’t come just to look at the Little Mermaid,” said Damien Degeorges, an associate researcher with the University of Greenland, referring to the small bronze statue of the mermaid from the fairytale by Danish author Hans Christian Andersen.
Hu and his wife Liu Yongqing viewed Copenhagen’s most popular tourist draw on a Friday sightseeing tour which also included the 17th-century Rosenborg castle and its China Room and a harbour trip on the royal yacht with Queen Margrethe II.
The first state visit to Denmark since the countries established diplomatic ties 62 years ago occurred less than two months after Chinese Premier Wen Jiabao went to Iceland, raising more questions about what China wants in the far north.
Danish and Chinese firms signed roughly $3 billion (1.9 billion pounds) worth of export and investment deals, including plans by Danish brewer Carlsberg (CARLb.CO) to build a big brewery in China and by Maersk (MAERSKb.CO) to expand the Chinese port of Ningbo.
Danish and Chinese officials also signed 11 agreements on Saturday in areas from health to climate, food and fisheries.
“This shows the high level of attention we attach to our relationship with Denmark,” Hu said before talks with Danish Prime Minister Helle Thorning-Schmidt on a range of topics from Europe’s economic crisis to China’s position on Syria.
The U.S. Thule air base is sometimes dubbed “the eyes and ears of U.S. defence”. With China showing increased interest in the Arctic and its mining companies already exploring for iron, copper and gold in Greenland, the island could find itself at the intersection of Chinese and U.S. interests.
Danish officials tried to shoot down speculation that Hu’s visit was ultimately about Greenland’s resources.
“Arctic issues are not on the agenda for this visit,” Danish Foreign Ministry spokesman Jean Ellermann-Kingombe said.
There was similar speculation when Wen started his tour of northern Europe two months ago by visiting Iceland. That he stopped first on a remote island of just 320,000 sparked suspicions of Beijing’s hunger for natural resources.
A Chinese developer is fighting an Icelandic government decision last year to bar him from buying land which some had suggested might be a cover for a possible future naval base and part of a wider strategy to gain a foothold in the region.
Hu may have chosen Denmark as the only stopover on his way to the G20 meeting in Mexico because Denmark holds the rotating EU presidency or because it supports China’s bid to get observer status in the Arctic Council, the body of eight Arctic states.
But analysts said that was only part of the picture.
“Most analysts agree that when China looks towards Denmark, it also looks towards Greenland,” said Degeorges.
Greenland, with a population of just 57,000, is dependent on exports of fish and shrimp and handouts from Denmark. It is keen to reduce that dependence by developing other industries.
London Mining LOND.L, a firm backed by Chinese steelmakers, is seeking permission to construct an iron ore mine northeast of Nuuk at a cost of $2.35 billion that would be the biggest industrial development in Greenland if sanctioned.
Martin Breum, author of a book on Denmark’s role in the Arctic and Greenland’s oil possibilities, said the iron ore project - though potentially hugely important to Greenland - was not what worried Western governments, industries and intelligence agencies.
“Potential Chinese control of the rare earth elements in Greenland is scary to a lot of governments in the Western world,” Breum said, noting that rare earth elements were used in products from telephones, televisions and hybrid cars to cruise missiles and night-vision goggles for soldiers.
“Rare earth elements are of crucial importance to the industries of the Western world,” Breum said, adding that China’s de facto monopoly on rare earth elements was intolerable to the West in the long term.
On June 13, a day before the Chinese president arrived in Denmark, European Commissioners Antonio Tajani and Andris Piebalgs signed an agreement in Nuuk to ensure that Greenland’s minerals remained available to free markets in the future.
Although the West’s concerns are real, Breum said he was no conspiracy theorist, and Hu’s visit was not a pretext.
“I don’t buy the conspiracy at all that the governments would secretly be negotiating some important deals about Greenland and minerals,” Breum said.
Editing by Alistair Scrutton and Ralph Gowling