The US State Department has said in a letter to Congress that re-establishing a consulate in Nuuk is part of a broader plan to increase the US presence in the Arctic.

The US has a "strategic interest in enhancing political, economic, and commercial relationships across the Arctic region," said the letter to the Senate Foreign Relations Committee.

President Donald Trump sparked a diplomatic dispute with US-ally Denmark this week after he proposed the US buy Greenland and the Danish government rejected the idea.

Danish prime minister Mette Frederiksen called it an "absurd discussion." Trump fired back that her comments were "nasty" and cancelled a planned trip to Denmark.

A permanent diplomatic presence would allow the US to "protect essential equities in Greenland while developing deeper relationships with Greenlandic officials and society," the letter said.

It said the consulate would be "a critical component of our efforts to increase US presence in the Arctic and would serve as an effective platform to advance US interests in Greenland."

US Congress would likely have been open to the idea, but after Trump's actions the proposal will likely gain greater scrutiny.

The US opened a consulate in Greenland in 1940 after the Nazi occupation of Denmark. It closed in 1953. The new one would open next year in the capital of the semi-autonomous territory.

The State Department said it has already assigned a Greenlandic affairs officer working out of the US Embassy in Copenhagen.

It now plans to hire locally-employed staff in Greenland by fall, or soon thereafter. Ultimately, it expects a staff of seven at the consulate in 2020.

Australian Associated Press