The United States on Friday halted all funding to a UN agency that helps Palestinian refugees in a decision further heightening tensions between the Palestinian leadership and the Trump administration.
A spokesman for Palestinian President Mahmoud Abbas denounced the decision as "a flagrant assault against the Palestinian people and a defiance of UN resolutions."
US State Department spokeswoman Heather Nauert said the business model and fiscal practices of the United Nations Relief and Works Agency (UNRWA) made it an "irredeemably flawed operation."
"The administration has carefully reviewed the issue and determined that the United States will not make additional contributions to UNRWA," she said in a statement.
Nauert added that the agency's "endlessly and exponentially expanding community of entitled beneficiaries is simply unsustainable and has been in crisis mode for many years."
The latest announcement comes a week after US administration announced it would redirect $200 million in Palestinian economic support funds for programs in the West Bank and Gaza.
UNRWA spokesman Chris Gunness voiced the agency's "deep regret and disappointment" at the decision, which he said was surprising given that a December US funding agreement had acknowledged UNRWA's successful management.
"We reject in the strongest possible terms the criticism that UNRWA's schools, health centers, and emergency assistance programs are 'irredeemably flawed,'" Gunness added in a series of Twitter posts.
The United States paid out $60 million to UNRWA in January, withholding another $65 million, from a promised $365 million for the year. The 68-year-old agency says it provides services to about 5 million Palestinian refugees in Jordan, Lebanon, Syria and the West Bank and Gaza.
US President Donald Trump and his aides say they want to improve the Palestinians' plight, as well as start negotiations on an Israeli-Palestinian peace agreement.
But under Trump, Washington has taken a number of actions that have alienated the Palestinians, including the recognition of Jerusalem as Israel's capital. That move was a reversal of longtime US policy and led the Palestinian leadership to boycott the Washington peace efforts being led by Jared Kushner, Trump's senior adviser and son-in-law.
Clashes have erupted along the Gaza border every Friday since Trump recognized Jerusalem as Israel’s capital and announced his plans to move the US Embassy from Tel Aviv to the capital.
"Our people went out today to make it clear that we will not give up Jerusalem and that there is no alternative to Palestine and the right of return," Hamas leader Ismail Haniyeh told gatherers at a violent demonstration on along the Gaza border.
'Not part of the solution'
The US decision was a "flagrant assault" against Palestinian people, Nabil Abu Rdainah, a spokesman for Palestinian President Mahmoud Abbas said on Friday.
"Such a punishment will not succeed to change the fact that the United States no longer has a role in the region and that it is not a part of the solution," Rdainah told Reuters. "Neither the United States nor anybody else will be able to dissolve UNRWA," he added.
In Gaza, Hamas condemned the US move as a "grave escalation against the Palestinian people."
"The American decision aims to wipe out the right of return and is a grave US escalation against the Palestinian people," said Hamas spokesman Sami Abu Zuhri.
"US leadership has become an enemy of our people and of our nation and we will not surrender before such unjust decisions," he added.
Earlier on Friday, German Foreign Minister Heiko Maas said Germany would increase its contributions to UNRWA because the funding crisis was fueling uncertainty. "The loss of this organization could unleash an uncontrollable chain reaction," Maas said.
UNRWA has faced a cash crisis since the United States, long its biggest donor, slashed funding earlier this year, saying the agency needed to make unspecified reforms and calling on the Palestinians to renew peace talks with Israel.
US spokeswoman Nauert said the United States would intensify talks with the United Nations, the region's governments and international stakeholders that could involve bilateral US assistance for Palestinian children.
"We are very mindful of and deeply concerned regarding the impact upon innocent Palestinians, especially school children, of the failure of UNRWA and key members of the regional and international donor community to reform and reset the UNRWA way of doing business," she said.
Gunness told Reuters earlier in August that UNRWA's support would be needed as long as the parties failed to reach an agreement to end the crisis.
"UNRWA does not perpetuate the conflict, the conflict perpetuates UNRWA," he said. "It is the failure of the political parties to resolve the refugee situation which perpetuates the continued existence of UNRWA."
'Corrupt, inefficient and doesn't help peace'
UNRWA has become the subject of significant scrutiny since Trump entered the White House.
After appointing his son-in-law Jared Kushner as a Mideast advisor charged with formulating a long-awaited peace initiative to put an end to the decades-long Palestinian-Israeli conflict, the UN refugee organization appeared to occupy a significant spot on his radar.
In an internal email published by Foreign Policy magazine, Kushner called for a "sincere effort to disrupt UNRWA."
"This (agency) perpetuates a status quo, is corrupt, inefficient and doesn't help peace," he reportedly wrote in an email dated January 11.
The agency was founded in 1949 after the first Arab-Israel war—the War of Independence—in the wake of the exodus of around 700,000 refugees who fled or were driven out of Israel on its founding as a state.
The nascent state of Israel absorbed Jewish refugees who were expelled or who fled from neighboring Arab countries, while other Arab states refused to grant the Palestinians citizenship.
As a result, UNRWA now looks after more than 5 million descendants of those original refugees, in Jordan, Lebanon, Syria and the Palestinian territories of the West Bank and Gaza Strip.
Israel argues that UNRWA perpetuates the Palestinian refugee problem by grossly inflating the number of bona fide refugees.
Since the agency includes descendants of Palestinian refugees from the War of Independence, it grants refugee status to Palestinians according to criteria that is not adhered to in any other refugee question.
Last week, US Ambassador to the United Nations Nikki Haley appeared to question the world body's count of Palestinian refugees.
By casting doubt on what some describe as an inflated number of Palestinian refugees, the US is removing a central stumbling block that has frustrated peace negotiations in the past, which calls for the so-called “right of return” of the millions of Palestinians defined as refugees.
Palestinians have clung to the notion that the refugees and their descendants should be allowed to settle in Israel as part of any peace deal, a precondition Israel says is designed to destroy its Jewish majority and therefore eradicate the Jewish state.
For Nikki Haley, however, the decision to withhold funds to the organization also stems from the Palestinians’ “bashing” of the US, despite the fact that it has for years been the chief financial donor to UNRWA.