By Lesley Wroughton and Ali Sawafta
WASHINGTON/RAMALLAH (Reuters) - The United States on Friday halted all funding to a U.N. agency that helps Palestinian refugees in a move likely to further heighten tensions between the Palestinians 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 U.N. resolutions."
State Department spokeswoman Heather Nauert said the business model and fiscal practices of the United Nations Relief and Works Agency (UNRWA) were 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 said the agency's "endlessly and exponentially expanding community of entitled beneficiaries is simply unsustainable and has been in crisis mode for many years."
UNRWA says it provides services to about 5 million Palestinian refugees in Jordan, Lebanon, Syria and the West Bank and Gaza. Most are descendants of people who fled Palestine in the 1948 war that led to the creation of the state of Israel.
U.S. 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 - a reversal of longtime U.S. policy - led Palestinian leadership to boycott Washington's peace efforts.
The United States paid out $60 million to UNRWA in January but withheld another $65 million pending a review.
"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," Abbas spokesman Nabil Abu Rdainah told Reuters.
He said "neither the United States nor else will be able to dissolve” UNRWA.
In Gaza, the Islamist group Hamas also condemned the U.S move as a "grave escalation against the Palestinian people."
"The American decision aims to wipe out the right of return and is a grave U.S escalation against the Palestinian people," said Hamas spokesman Sami Abu Zuhri.
Abu Zuhri told Reuters the "U.S leadership has become an enemy of our people and of our nation and we will not surrender before such unjust decisions."
Earlier on Friday, German Foreign Minister Heiko Maas said Germany would increase its contributions to UNRWA because the funding crisis was fuelling uncertainty. "The loss of this organisation 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.
The last peace talks collapsed in 2014, partly because of Israel's opposition to an attempted unity pact between the Fatah and Hamas Palestinian factions and to Israeli settlement building on occupied land that Palestinians seek for a state, among other factors.
ADVERTISEMENT(Additional reporting by Nidal al-Mughrabi in Gaza and Stephen Farrell in Jerusalem.; Editing by Yara Bayoumy and Bill Trott)