March 22, 2018 / 2:57 PM / 4 months ago

Greenland's courting of China for airport projects worries Denmark

* Defence treaty gives U.S. extensive rights in Greenland

* Arctic is increasingly the focus of great power rivalry

* "China has no business in Greenland"-Danish official

By Erik Matzen and Tom Daly

COPENHAGEN/BEIJING, March 22 (Reuters) - Greenland is courting Chinese investors and construction firms to help expand three airports, causing concerns in the Danish government that Chinese involvement in the Arctic island could upset its close ally, the United States.

Chinese interest in Greenland, a self-ruling part of the Kingdom of Denmark, comes after Beijing in January laid out ambitions to form a "Polar Silk Road" by developing shipping lanes opened up by global warming and encouraging enterprises to build infrastructure in the Arctic.

Greenland, also keen to benefit from rising Arctic activity, plans to expand the airports in the capital Nuuk, the tourist hub in Ilulissat and at Qaqortoq in southern Greenland to allow direct flights from Europe and North America.

The island lacks simple infrastructure for its tiny population of only 56,000, has no roads between the country's 17 towns and, for now, only one commercial international airport, at Kangerlussuaq, western Greenland.

During a visit headed by Greenland's Premier Kim Kielsen to Beijing late last year, the delegation met representatives of engineering and construction company China Communications Construction Co (CCCC) and Beijing Construction Engineering Group (BCEG).

Now, Chinese construction companies have appeared on a list of 11 companies or consortia that have shown interest in the projects with an estimated cost of 3.6 billion Danish crowns ($595 million), according to Kalaallit Airports, a state-owned company set up to build, own and operate the airports.

Other interested companies are from Denmark, Iceland, Canada, the Netherlands and the Faroe Islands, the company's chairman Johannus Egholm Hansen told Reuters.

The company expects to shortlist five or six of them this month or next and begin construction in October, he said.

Greenland's government declined to comment on the Chinese interest.

Greenland says it can finance 2.1 billion crowns, but will need external funding for the remaining 1.5 billion.

"Our visit to China should be viewed in the context of seeking funding to these future investments," Kielsen said during the visit to Beijing, following meetings with the Export-Import Bank of China (EXIM).

EXIM, CCCC and BCEG did not reply when contacted via email and fax.

STRONG OPPOSITION

Chinese activity in Greenland is met with strong opposition in Copenhagen. A defence treaty between Denmark and the United States dating back to 1951 gives the U.S. military almost unlimited rights in Greenland, where it has the Thule air base.

"We are deeply concerned. China has no business in Greenland," a high-ranking Danish government official in Copenhagen told Reuters on condition of anonymity.

"Denmark has a big responsibility to live up to with regards to our closest ally, the United States," the person said.

While Greenland's self-rule authority decides on most domestic matters, foreign and security policy is handled by Copenhagen. Foreign investment in infrastructure projects is a grey zone, but if China is involved, Copenhagen holds the right to say no, the government source said.

Danish Prime Minister Lars Lokke Rasmussen, Defence Minister Claus Hjort Frederiksen and Foreign Minister Anders Samuelsen all declined to comment.

The U.S. Embassy in Copenhagen also declined immediate comment.

"It's obvious that the United States doesn't want a superpower like China to have such large-scale access to Greenland," Soren Espersen, spokesman for foreign and security affairs of the Danish People's Party, a key ally of the minority government, told Reuters.

"Denmark cannot play on two horses. The government in Copenhagen has to stop the Chinese plans, because if it doesn't, the United States will," he said.

In 2016, the Danish government on direct orders from Washington prevented a Chinese investor from buying a former marine station in southern Greenland, according to sources.

Trade tensions between the United States and China have been rising and Beijing was bracing on Thursday for an announcement from U.S. President Donald Trump of tariffs of as much as $60 billion on Chinese imports.

"In Greenland we don't suffer from China anxiety, like they obviously do in the government in Copenhagen," Aaja Chemnitz Larsen, member of the Danish parliament for Greenland and head of Greenland's foreign affairs committee, told Reuters.

"They lack an understanding for Greenland's need for investments, and we can sense a big interest in China for our projects," she said.

China's foreign ministry said in a faxed statement it has "no understanding of the situation" mentioned.

"At present, China and Denmark's all-round strategic partnership relationship is developing thoroughly, and China has a good cooperative relationship with Denmark's autonomous territory Greenland," the ministry said.

"The Chinese government encourages and supports relevant companies to participate in the development and use of the Arctic in accordance with lawful, green, cooperative and market principles," it said.

Greenland, with vast mineral resources including uranium and rare earths, is strategically important for the U.S. military as the shortest route from North America to Europe goes via the Arctic island.

The Thule air base, located 1200 kms (750 miles) north of the Arctic Circle, hosts a radar station that is part of a U.S. ballistic missile early warning system. ($1 = 6.0502 Danish crowns) (Additional reporting by Ben Blanchard and Brenda Goh in Beijing; writing by Jacob Gronholt-Pedersen; Editing by Adrian Croft)

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