Overview
This week’s negotiations between the US, Greenland, and Denmark were inconclusive: the US insists on acquiring Greenland to ensure its foreign policy of hemispheric dominance—even at the expense of Denmark's territorial integrity and Greenland’s sovereignty—in order to counter Russia’s Arctic militarization. The US and EU face a game theory problem: escalate or compromise. The Europeans are inclined to focus on shared interests and deepen NATO-based Arctic security cooperation as an off-ramp. But a scenario where both the US and Europe escalate tensions over Greenland could risk a shake-down of the $1.5 trillion US-EU trade relationship and a shuttering of NATO, emboldening Russia, increasing currency volatility risks, and intensifying a global power vacuum.
What Does the US Want in Greenland?
Trump’s insistence on annexing Greenland aligns with a broader refocus of US foreign policy on hemispheric dominance, as reflected in the 2025 National Security Strategy. This refocus suggests that the US, amid a relative decline in power, should focus on its core interests countering adversaries in its backyard as opposed to overextending resources further abroad. This is the same coherent policy that drives the “Donroe” doctrine, transatlantic burden-shifting, and bullish diplomacy to freeze international conflicts. Trump’s interest in Greenland reflects a return to history: President Truman offered to buy Greenland after the Second World War, before settling on a 1951 treaty giving the US extensive military rights on the island. Trump, in his real estate mindset, insists that owning Greenland is better than renting. This does not mean a military option is serious—Denmark, Greenland’s sovereign and a close US ally, is no Venezuela—but the US may explore other means of leverage to achieve hemispheric dominance.
However, hemispheric dominance is only a psychological rationale for annexation since Denmark is a willing security partner. The Trump administration’s persistence on Greenland is likely caused by Russia’s growing Arctic militarization. Russia’s Soviet-era Bastion defense concept—protecting its homeland via multi-layered air defense, domain awareness, sea denial, coastal defense—must compensate melting polar sea ice to the north. Since the mid-2010s, Russia has reopened 50 Arctic military installations, expanded its Northern Fleet in the Kola Peninsula, and deployed its nuclear-capable submarines in the High North. Fixated on its war in Ukraine, Russia has resorted to hybrid operations, like damaging the Estlink 2 interconnector between Estonia and Finland in December 2024 or conducting aviation flights in American, Japanese, and Korean Arctic air defense identification zones, sometimes alongside China.
Beyond a security dilemma, Russia’s beefed-up presence can lay claim to future resources and control over the Northern Sea Route, which is faster than the Suez Canal for Eurasian trade. Roughly 80% of Russia’s gas and 17% of its oil reserves are in the Arctic zone. Projects like the Arctic LNG 2, while delayed due to sanctions, are a strategic priority for Russia amid stranded energy markets in Europe.
Lastly, there is a resources rationale. Trade tensions with China have accelerated the scramble for autonomous rare earth elements (REE) value chains, and Greenland boasts a projected 1.5 million tons of REE reserves. However, Greenland’s two REE mining concessions, Kvanefjeld and Tanbreez, have yet to begin operations. Kvanefjeld is frozen due to its uranium content, a core concern of the indigenous rights party in Greenland’s government. Tanbreez completed its economic assessment in 2025 but lacks necessary infrastructure for profitability: ships and planes are needed for transport due to a lack of roads, but the closest port can only handle 50,000 tons of cargo annually. For the foreseeable future, Greenland will remain dependent on seafood exports and Danish subsidies. The US would lose, not gain, money in the short term.
Bargaining the Arctic: What Will the Europeans Offer?
Wednesday’s trilateral between American, Danish, and Greenlandic foreign ministers affirmed “fundamental disagreement” but agreed to a dialogue to work out concerns. Both the US and Europe face a game theory problem: apply pressure or seek compromise. Unilateral compromise means defeat, but if both choose pressure, the entire spectrum of the transatlantic alliance could unravel.
The US is serious about Greenland, but it will use pressure, not military force, to negotiate. This is Trump’s dealmaking style, and military action remains logistically unfeasible: an expeditionary force would require more than the US’ current three icebreakers (two past service life), limited Arctic domain awareness, and few ice-capable land vehicles to traverse and hold Greenland’s unconnected terrain; and compared to Nordic NATO allies, US forces fare poorly in cold-weather exercises. Instead, the US may leverage transatlantic dependencies: the US could stop intelligence-sharing collected at the Pituffik Space Base, directly negotiate Arctic spheres of influence (and co-investment) with Russia as interlinked in a Ukraine peace deal, threaten high tariffs against Europe, pause weapons deliveries, or draw down troops on NATO’s eastern flank. More directly, it is not hard to imagine Trump attempting to wedge Denmark and Greenland, cutting deals with the latter to foment independence and establish an economic foothold.
The most likely scenario is that Europe will cave to these forms of US pressure to offer a suitable compromise. Throughout 2025, the Europeans have accepted asymmetric deals to preserve their vital transatlantic interests: on trade, instead of preparing countermeasures, Europe opted for an uneven truce for 15% baseline tariffs to avoid the worst consequences. On defense, aiming to prevent a US withdrawal from Europe, NATO allies quickly embraced Trump’s call for a new 5% defense spending pledge. Ukraine, wanting to preserve US intelligence-sharing, adopted a minerals deal to keep the US engaged.
Europe will likely attempt to similarly manage the Greenland dispute. First, Europe will look toward military concessions. There is already defense industrial cooperation to build upon: In October 2025, the US closed a $6 billion deal with Finland to procure and co-produce 11 icebreakers, and Denmark concluded a separate $4.5 billion deal for F-35 jets and dedicated $4.2 billion to build two new military units and a joint Arctic command headquarters in Nuuk. This past week, NATO allies have preemptively suggested mimicking NATO’s Baltic Sentry mission, focused on maritime surveillance after Russia allegedly damaged the Estlink 2 interconnector, in an Arctic Sentry mission. This could unlock industrial cooperation on reconnaissance tools, like drones, to fill NATO’s domain awareness gap in the High North. Meanwhile, Germany, France, Norway, and Sweden announced they are sending a small contingent of troops to Greenland for weekend military exercises. This signals intent to defend territory covered by the EU’s security guarantee, but also preparedness to take on additional responsibility to defend Greenland from Russia.
The Europeans could attempt to captivate the US with economic deals, provided that there is political buy-in from Greenland’s government. This is uncharted territory, requiring some imagination. It is possible that the US could be satisfied with (co-)ownership in some mining concessions, unlocking gridlock on frozen projects like the Kvanefjeld REE mine, or rent-to-own agreements on some land. More robustly, the US may opt to mimic something like the Ukraine minerals deal, where long-term American investment from companies, the US Export-Import Bank, or the US International Development Finance Corporation in Greenland’s infrastructure (such as seaports, airports, electricity generation, and roads) could guarantee shares over some mineral wealth, with the rest going to a Greenlandic sovereign wealth fund. Nonetheless, Greenlanders are not supportive of an association agreement or annexation with the US and will want to balance environmental protection for fisheries.
The Risk: An Escalatory Spiral Unravels the Transatlantic Alliance
The Greenland dispute has captured attention, but there are some red herrings to dismiss. Russia, bogged down in Ukraine, is unable to assert control over the Arctic in the short-term. China is investing in its ice-capable equipment but still relies on Russia for access to the Northern Sea Route, creating friction. The US, despite coercive rhetoric and its decapitation of Venezuela, is unlikely to attack a close NATO ally. Indeed, the most realistic downside risk is that both the US and Europe escalate instead of compromise, shuttering transatlantic cooperation.
Businesses must be prepared for a scenario where the EU chooses to retaliate instead of compromise. Here, the $1.5 trillion US-EU trade relationship will re-enter the crossfire. First, politically sensitive deals—like the US-Finland icebreaker deal—may face the chopping block. Second, the Turnberry trade truce could be challenged. Currently, the European Parliament is delaying the removal of industrial tariffs on the US, a key concession, and the European Commission is gearing up for new telecom rules next week that regulate or exclude US tech players, including Starlink, thereby escalating an ongoing tech clash that could spill over into data transfers. Third, and more extreme, the EU could attempt to mimic China, exerting control over key bottlenecks in the US tech industry, such as within the semiconductor value chain. Such a move could occur under the Anti-Coercion Instrument, which grants the EU flexible powers to restrict imports after an investigation into unfair trade practices. Beyond costly compliance turbulence for businesses, a renewed US-EU trade war could undermine confidence in the dollar, increase inflation, or open opportunities for China to increase its trade surplus.
More abstractly, a US-Europe escalation spiral will undermine the security interests of both. Without allied scale, the US and Nordic NATO allies are unlikely to deter Russia or China in the Arctic, jeopardizing US hemispheric dominance. Tensions over Greenland could result in a “dormant NATO,” emboldening Russia’s interference in eastern Europe, undermining peace efforts in Ukraine, and downgrading credit confidence across Europe. Severed transatlantic relations could strand top consumers of US defense equipment, undermining the US defense industrial base and its readiness for a major contingency elsewhere, like Taiwan.
