President Trump has expressed interest in buying the island of Greenland and has discussed the prospect with several senior officials in his administration. Greenland is a self-ruling part of Denmark with a population of about 56,000. Trump is scheduled to make his first visit to Denmark early next month. Is he going there to make an offer? The jokes are already starting, Trump’s Folly.
Trump’s Folly is in reference to Seward’s Folly in the U.S. acquisition of Alaska from the Russian Empire. U.S. Secretary of State William Seward entered into negotiations with Russian minister Eduard de Stoeckl for the purchase of Alaska. Alaska was subsequently formally transferred to the United States on October 18, 1867, for the cost of $7.2 million.
There would be certain advantages to owning Greenland, the three main ones being military, natural resources and scientific. A decades-old defense treaty between Denmark and the US gives the military virtually unlimited rights. America has used those rights to build its northernmost base, Thule Air Base, located 750 miles north of the Arctic Circle. The U.S. is not the only one interested in Greenland. The U.S. has prevented Beijing from financing three airports on Greenland that would give it a toehold on the strategically important island. Greenland is also the world’s largest by square mileage and it has vast natural resources across its 811,000 square miles (519,040,000 acres). Today, Greenland relies on $591 million of subsidies from Denmark annually, which makes up about 60% of its annual budget.
US interest in owning Greenland dates back more than a century. After WWII, Harry Truman offered Denmark $100 million for the island – Denmark refused. The State Department also explored buying Greenland and Iceland back in 1867, but nothing came of it. What would be the tentative price for this particular piece of real estate?
Well if the U.S. was willing to pay $100 million, back around 1950 Greenland, this would only be about $1 Billion today (converter). Remember this was right after WWII, so the U.S. was trying to pick up real estate on the cheap, from a region suffering from catastrophic war – no other bidders. Greenland today is much more strategic today than before and natural resources are more scarce globally than before.
Using Alaska as an example (though Alaska is probably much better land), let’s use the “reasonable” price of $100 an acre (most land is undeveloped in Greenland). This would put a valuation of about $52 Billion for Greenland. Double this number for any infrastructure existing on Greenland. From the number of $100 Billion, then doubling again, because Trump. This brings us to a cool $200 Billion.
Folly or not, what is the likelihood that the “Great Trump Purchase of Greenland” will happen? Probably nil. But ask in a few years, if or when, a European recession occurs, maybe the Danish people would change their minds. Let the bidding begin!