Source : THE AGE NEWS
By Sarah Kessler
Donald Trump, who has long loved big real estate deals, has made it clear that he’s serious about striking one for Greenland. Never mind that Denmark, which controls the island, says the territory isn’t for sale.
But if a negotiation were to materialise, what would, or should, the United States offer?
Trump has said he wants to acquire Greenland for national defence reasons.Credit: AP
David Barker, a real estate developer and former economist at the New York Fed, helped us with the thought experiment. (Barker made waves in 2009 when he argued that the American purchase of Alaska in 1867, for less than 2 cents per acre, was a bad deal from a purely financial investment perspective.) Here’s his back-of-a-napkin maths for valuing Greenland, which he estimated could be worth between $US12.5 billion ($20.2 billion) and $US77 billion.
Alaska might not be the best comparison. Trump has said he wants to acquire Greenland for national defence reasons, which wasn’t the clearly defined case for the Alaska purchase. (In 2025 dollars, the deal was worth more than $US150 million.)
Consider the Virgin Islands instead. The United States bought what were known as the Danish West Indies from Denmark in 1917 for $US25 million (about $US657 million today) because of national defence concerns. Greenland is obviously much bigger, but in both cases, the defensive value is based on location rather than size.
One way of doing the math: Barker suggested using the prices for the Virgin Islands and Alaska as starting points but adjusting them based on the nominal change in gross domestic product for the United States or Denmark to account for both inflation and economic growth. “A bigger economy can afford to pay more, and a bigger economy would probably demand a larger price,” he said.
For the low-end valuation, he adjusted the purchase price of the Virgin Islands for the five-hundredfold growth in Denmark’s GDP since 1917. That implied a Greenland price tag of $US12.5 billion. Adjusting the $US7.2 million cost of the Alaska purchase for the growth in US GDP produced the high end of $US77 billion.
Neither comparison is perfect. The purchase of the Virgin Islands was more recent, while Alaska has a similar climate and size. “The feeling of many at the time of the Alaska purchase was that the US had overpaid, while this was not true of the purchase of the Danish West Indies,” Barker said.
The approach makes less sense if national defence isn’t the main objective. The United States has long had a military presence on Greenland, and Denmark is a NATO ally, noted Nikola Swann, global head of governments and multilaterals at SwissThink, a credit markets consulting firm.
Access to Greenland’s stores of minerals such as copper and lithium, which are useful for critical technology such as batteries and electric vehicles, may be more important to the United States, Swann said.
Barker said basing a valuation on Greenland’s resources could be more difficult. “If Greenland really helps us to defend the US, then its value increases with the size of the US economy,” Barker said. “If the only value of Greenland was minerals, then the size of the US economy wouldn’t have much effect on the price.”
The Financial Times suggested that Greenland’s resources justified a valuation of $US1.1 trillion, but Barker said the tongue-in-cheek estimate made a dubious assumption. “The US government would not receive the full benefit of resource extraction,” he said. “It would sell drilling and mining rights to companies whose bids would leave room for their own costs and profits.”
Don’t forget other points of leverage. Trump said this past week that he could not rule out using military force or tariffs. Denmark’s economy has soared in recent years because of pharmaceutical exports such as Novo Nordisk’s Wegovy and Ozempic, which are largely exported to the United States.
“These have been important to recent Danish economic growth,” Swann said, giving Trump an advantage.
There is one thing everyone seems to agree on. Buying Greenland “would be the deal of the century,” Barker said.
This article originally appeared in The New York Times.
