U.S. cuts all funding to UN agency for Palestinian refugees

After months of review, the Trump administration has announced it will stop all funding to the UN Relief and Works Agency (UNRWA), which in recent years reached $350 million annually.

Why it matters: The U.S. was the main funder of UNRWA for years. Many in the State Department, Pentagon and intelligence community had reservations about a total funding cut, fearing it would further destabilize Jordan, Gaza and the West Bank. The move to stop all U.S. funding to UNRWA was led by senior adviser Jared Kushner and UN Ambassador Nikki Haley.

• The cutting of U.S. aid to UNRWA will make the continuation of the agency's operations in the Middle East almost impossible.
• The decision might also lead to serious deterioration in the humanitarian situation of Palestinian refugees due to the fact that UNRWA provides food, medical services and education to millions of Palestinian refugees in Gaza, the West Bank, Jordan, Syria and Lebanon.
• The U.S. will now try to transfer aid to Palestinian refugees through other channels.

The Trump administration statement said the decision to cut funding to UNRWA was made because the U.S. "was no longer willing to shoulder the very disproportionate share of the burden of UNRWA’s costs." The statement also said most of the international community has not shown sufficient response to U.S. requests for burden sharing.

• In its statement, the Trump administration also criticized UNRWA for its "unsustainable and flawed business model and fiscal practices" mainly the agency's "endlessly and exponentially expanding community of entitled beneficiaries".  – is simply unsustainable and has been in crisis mode for many years.    
• The statement did not say anything about the Trump administration's policy regarding the Palestinian refugee issue — one of the core issues in every final status negotiation between Israel and the Palestinians.
• A report on Israel's Channel 2 News claimed last week that the Trump administration will announce it's taking the refugee issue "off the table."

A senior U.S. official told me those reports were false and stressed there is no change in U.S. policy on the Palestinian refugees issue at this time:

"We continue to study and evaluate alternatives for an equitable resolution of all refugee issues."

The U.S. official also said the Trump administration is not trying to dismantle UNRWA and is not planning on asking Israel to stop its operations in the West Bank.  

What's next: Despite the decision to stop funding to UNRWA, the Trump administration is going to try and find way to give aid to Palestinian refugees through different UN agencies or through host countries.

• Israeli Prime Minister Netanyahu is supportive of the U.S. move, but many in the Israeli defense establishment are worried it will lead to unrest in the West Bank and Gaza.
• Officials in Netanyahu's office tell me Israel thinks the U.S. aid should be transferred to other organizations so that it could be spent for the benefit of the Palestinian population "and not for perpetuating the Palestinian refugee ethos."

The Palestinians, who have cut off talks with the U.S., see the U.S. decision on UNRWA as a further attempt to push them into accepting the peace plan the White House has been working on for months.