Greenland's "Framework Agreement" leaks: Denmark transfers sovereignty over "small piece of Greenland land" and the United States will build a military base

**Source**: Wall Street Insights

**By Zhao Ying**

NATO has discussed a compromise plan: Denmark will cede sovereignty over a small parcel of land on Greenland to the United States for the construction of a military base. Two officials present at the meeting likened this arrangement to the UK's military bases in Cyprus, which are regarded as British territory. Notably, the U.S. already maintains a military presence in Greenland—the Pituffik Space Base currently hosts a permanent contingent of approximately 150 U.S. service members.

The Trump administration and NATO have reached a "framework agreement" on the Greenland issue, under which Denmark will transfer sovereignty of a small plot of land on Greenland to the U.S. for military base construction. This arrangement has averted the threat of U.S. tariffs on Europe.

According to CCTV News, on January 21 local time, U.S. President Donald Trump posted on his social media platform Truth Social stating that, based on his meeting with NATO Secretary-General Mark Rutte, they have reached an agreement on a framework for future cooperation covering Greenland and the entire Arctic region. Trump indicated that he will not implement the tariff measures originally scheduled to take effect on February 1. In an interview with CNBC, Trump described this as a "permanent" long-term agreement and stated that the U.S. will "participate" in Greenland's mineral rights.

The *New York Times* reported that the agreement was discussed and formulated during a NATO meeting on Wednesday. Senior military officials from NATO member states deliberated a compromise proposal: Denmark would hand over sovereignty of a small piece of land on Greenland to the U.S. to build a military base. Two officials attending the meeting drew a parallel between this arrangement and the UK's bases in Cyprus, which are considered British territory.

This abrupt U-turn triggered a sharp rebound in the market, just as predicted earlier by JPMorgan's trading desk. However, there remains confusion among Greenlandic and Danish parties regarding the details of the agreement, with some Greenlandic politicians expressing strong dissatisfaction over being excluded from the negotiations.

## Agreement Framework: A Sovereignty-for-Base Compromise

Citing three senior officials familiar with the discussions, the *New York Times* reported that the agreement was proposed by NATO Secretary-General Rutte, a former Dutch Prime Minister who is believed to have close ties with Trump. The core of the agreement is that Denmark will transfer sovereignty of a small parcel of land on Greenland to the U.S. for the construction of a military base.

In a statement, NATO Spokesperson Allison Hart said that the Secretary-General held a "very productive meeting" with President Trump, discussing the critical significance of Arctic security to all allies, including the United States. The statement noted that discussions among NATO allies on this framework will focus on ensuring Arctic security through collective efforts by allies, particularly the seven NATO member states with Arctic interests. Negotiations between Denmark, Greenland, and the United States will continue, aiming to ensure that "Russia never gains an economic or military foothold in Greenland."

In an interview with CNBC, Trump declined to disclose specific details of the agreement but confirmed it is a "permanent" deal. He stated that he "assumes" Denmark has been involved in discussions about the potential agreement concerning Greenland. He also noted that the Greenland issue was a trade war threat, adding that he does not believe the U.S. will resort to military force and that the U.S. will "participate" in Greenland's mineral rights.

## The U.S. Already Has a Military Presence in Greenland

It is worth noting that the U.S. already maintains a military base in Greenland. The Pituffik Space Base (formerly Thule Air Base), located 932 miles north of Nuuk, Greenland's capital, and 750 miles north of the Arctic Circle, currently houses around 150 U.S. military personnel and plays a key role in the U.S. missile detection system.

The U.S. has maintained a military presence in Greenland since World War II. After Nazi Germany occupied Denmark, Greenland was left undefended, prompting the U.S. to deploy troops, build airfields, weather stations and defense facilities, and monitor German submarines in the North Atlantic. This arrangement was formalized in 1951 through a defense treaty with Denmark, a part of the NATO framework, which allows the U.S. to operate military installations there.

Under the 1951 Greenland Defense Agreement, as long as Denmark and the U.S. remain NATO members, the U.S. may operate the base under the NATO framework. The agreement stipulates that the Danish flag must be flown at the base to acknowledge that it is located on Danish territory, but the U.S. may fly its national flag alongside the Danish flag at the facilities it operates. The agreement was amended in 2004 to grant the U.S. unrestricted access to the Pituffik Base.

In March 2025, Vice President JD Vance led a U.S. delegation to visit the Pituffik Space Base. In his statement, Trump said that Vice President JD Vance, Secretary of State Marco Rubio, Special Envoy Steve Witkoff, and other necessary personnel will be responsible for the negotiations and will report directly to him.

## JPMorgan's Prediction Comes True: Negotiated Arrangement Was the Most Likely Outcome

In a previous analysis, JPMorgan pointed out that the most probable outcome would be a negotiated arrangement that expands the U.S. security and economic presence in the region, and addresses the U.S.-stated goals—strengthening the Arctic security posture, enhancing missile defense early warning capabilities, and accessing Greenland's natural resources—while Denmark retains sovereignty.

JPMorgan argued that a sale is unlikely because the U.S. does not need formal territorial control to achieve its stated objectives, and such a move would seemingly struggle to gain approval from Denmark and Greenland. An invasion, on the other hand, is an extreme tail risk for multiple reasons: it would perform extremely poorly in voter polls, and needless to say, it would unravel NATO faster than Arctic ice melts.

The market reacted positively to the news, with global markets experiencing significant volatility following Trump's announcement.

## Reactions from Greenland and Denmark: Mixed Hopes and Confusion

The reactions from Greenland and Denmark to this sudden announcement have been mixed. Danish Foreign Minister Lars Løkke Rasmussen stated that the day ended better than it began. "This morning we were facing a president who did not rule out seizing Greenland by force. Now he says he will not seize Greenland by force," Rasmussen told Danish television channel TV 2. He described this as creating "a glimmer of hope."

Mikkel Runge Olesen, a researcher at the Danish Institute of International Affairs, said: "This looks more promising than anything I have seen in weeks. It is undoubtedly a decisive new development. The Danes are now cautiously optimistic."

However, Greenlandic politicians have voiced strong dissatisfaction over being excluded from the negotiations. Aaja Chemnitz, a Greenlandic member of the Danish Parliament, posted on Facebook: "What we have seen in Trump's statements these days is completely absurd. NATO has absolutely no mandate to negotiate anything concerning us Greenlanders without our participation." "Do not speak about us without us," she said, "This is creating utter chaos."

Greenlandic MP Kuno Fencker said he is dissatisfied that all negotiations between Trump and NATO regarding Greenland have taken place without Greenland's involvement. "Greenland should be directly involved in what is happening," he said, "That is what we want." The Greenlandic government stated that it will issue a comment on Trump's remarks on Thursday.

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