If we are to take President Donald Trump at his word, he is dedicated to taking control of Greenland. This ambition has triggered serious debate in European defense circles about a once-unthinkable contingency: a potential crisis involving NATO’s most prominent member and the Kingdom of Denmark.
“We are going to do something on Greenland, whether they like it or not,” Donald Trump stated on Jan. 9, adding that he would prefer “the easy way,” but that “if we don’t do it the easy way, then we will do it the hard way.”
The consequences of pursuing the “hard way” are clear. As Danish Prime Minister Mette Frederiksen has cautioned, “If the United States chooses to attack another NATO country militarily, then everything stops — including NATO and thus the security that has been established since the end of the Second World War.”
Realistically, Denmark cannot defend Greenland against a major power. For Washington, Greenland is the northern flank of the homeland, and the priority is preventing rival powers from gaining influence so close to the United States. There is, however, a viable alternative that avoids both annexation and a NATO crisis.
Ironically, the answer to this Arctic standoff may be found in much warmer climates: the Compacts of Free Association (COFA) agreements between Washington and the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. Through these established COFA frameworks, the US can gain the strategic benefits it seeks in Greenland without annexation or risking a rupture in the transatlantic alliance.
A COFA is a legally binding agreement between the United States and a nation that preserves full sovereignty while enabling strategic cooperation. COFA nations retain control over their land, laws, and institutions. The US may gain access to specific sites for defense and surveillance, but only under terms negotiated and approved by the partner government, and with the option to deny third-country military access.
COFA citizens typically receive special rights to live, work, and study in the US, along with other federal benefits. Crucially, COFAs are partnerships, not annexation agreements. They offer a model for transparent, rules-based engagement that respects national identity and democratic governance.
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This model is not an endpoint but a scalable first step that expands US–Greenland cooperation in defense access, Arctic domain awareness, and infrastructure. By offering a transformative $30 billion (191.2 billion kr.) Sovereign Wealth Fund with Strategic Mentorship from Alaska, Greenland could accelerate its financial independence and development with the United States and secure a Northern Alliance.
Greenland’s Status And Aspirations
Greenland is geographically vast but sparsely populated, with approximately 56,000 residents (the average population of the three current COFA member states is around 55,000). Over 80 percent of its landmass is covered by a thick ice sheet, rendering most of the territory uninhabitable.
Greenland’s elected leadership, including Prime Minister Jens-Frederik Nielsen and the Demokraatit Party, favors a gradual, conditions-based path to independence. Denmark, however, has no desire to see Greenland move beyond its realm; the island carries deep political and symbolic weight for Copenhagen. These opposing interests coexist uneasily with Greenland’s aspirations for greater self-determination, grounded in Article 1(2) of the UN Charter. Escalating strategic friction may place Denmark under considerable pressure to accommodate Greenland’s evolving aspirations to ensure the stability of transatlantic cooperation.
If Washington is determined to shape the Arctic’s future, there are other options than annexation. Recent reporting indicates the White House has considered offering direct payments to Greenlanders to encourage a vote to join the United States; if money is on the table, a Sovereign Wealth Fund provides a far more sustainable alternative.
A COFA would affirm Greenland’s sovereignty, boost its economy, and strengthen US deterrence against adversaries in the Arctic, both militarily and economically. Central to this would be a proposed $30 billion (191.2 billion kr.) Sovereign Wealth Fund, modeled on Alaska’s Permanent Fund, to support infrastructure, education, energy, and defense. Alaska could serve as a strategic mentor, offering expertise in fund management, Arctic logistics, and indigenous engagement. Notably, the deep ancestral and cultural ties between the Inuit populations of Alaska and Greenland, descendants of the same Arctic peoples, support the creation of a foundation of mutual understanding and respect.
To illustrate the fund’s potential: at a conservative 5 percent annual return, the fund would generate $1.5 billion (9.56 billion kr.), enough to replace Greenland’s current yearly block grant of approximately $667.5 million (4.25 billion kr.). To inflation-proof the fund, reinvest 2.5 percentage points of the return (i.e., $750 million / 4.78 billion kr.), leaving an annual distribution of $750 million (4.78 billion kr.). If the fund achieves returns similar to Alaska’s recent 8.34 percent average annual interest rate, it will reach a yearly total of $2.5 billion (15.95 billion kr.), a transformative amount for Greenland’s economy. This approach would allow the US to support Greenlandic prosperity without becoming entangled in recurring aid obligations.
For context, the $30 billion (191.2 billion kr.) represents just 3.53 percent of the Pentagon’s FY 2026 budget request of $848 billion. That request includes Arctic surveillance and infrastructure initiatives, suggesting interest in additional strategic investment.
Compromises rarely satisfy all parties, but this course of action could avoid an intra-alliance crisis and offer Greenland a strategic path forward, one that honors national identity and strengthens democratic governance.
Together with a Sovereign Wealth Fund and Alaskan mentorship, a COFA would enable Greenland to achieve sustainable economic independence while creating a durable, rules-based framework for US–Greenland cooperation and the foundation for deeper collaboration over time.
Lt. Col. Jeffery M. Fritz is an Armor officer in the United States Army and an Alaskan, born and raised in the state. The views expressed are those of the author and do not necessarily reflect the opinions of the United States Army.