Critics say move to end all funding for agency that assists millions of refugees could further destabilise Middle East

Palestinians have condemned the US decision to halt funding to a UN agency that helps educate, feed and provide healthcare for more than 5 million Palestinian refugees across several countries as a “flagrant assault” on their rights.

The US state department said on Friday that it would no longer support the UN Relief and Works Agency (UNRWA), which operates in the occupied territories as well as Jordan, Syria and Lebanon. It described the organisation as “irredeemably flawed”.

The announcement sparked anger and concern, even though it had been widely anticipated. Critics see the move as part of a concerted plan to undermine core Palestinian demands in peace negotiations and say it could further destabilise the Middle East.

The decision means the US, by far the biggest UNRWA donor, will withhold $300m (£230m) in annual funds, which it had agreed to provide only last December. Donald Trump had already axed $200m in bilateral aid for Gaza and the West Bank.

Trump's UN funding move risks damage to Palestine, Israel and US Read more

Palestinians said they considered the move a hostile one, particularly coming after the Trump administration recognised Jerusalem as Israel’s capital and moved its embassy there. Palestinians also claim the eastern part of the city as a capital for a future state.

“[This move] does not serve peace but rather strengthens terrorism in the region,” a spokesman for the Palestinian president, Mahmoud Abbas, said on Saturday. He denounced it as “a flagrant assault against the Palestinian people and a defiance of UN resolutions”.

The impact will potentially be serious – and rapid – for the millions who rely on the agency. “Such a decision aims at closing schools, clinics, hospitals and starving people,” said Saeb Erekat, the Palestinian chief negotiator.

He said any vacuum in services could be exploited by extremists, and said the Palestinian Authority has been helping UNRWA fund camps in Syria and Lebanon for several years.

That spending, he said, was “in order not to allow terrorist organisations such as Isis to recruit our people there because of their needs. Now, with this cut, what does this mean? … Those elements that want to achieve peace based on a peaceful, two state solution, are being destroyed”.

For now, there is only enough funding to run schools and health clinics for a month, the UNRWA spokesman Christopher Gunness said. The organisation faced a $217m shortfall in its budget, which it would work to make up from other sources, he said.

Gaza resident Hisham Saqallah described the move as “political blackmail” that would increase unrest. “If they stop aid to schools, this means destroying the futures of a large number of students and throwing them into the street,” he said. In Gaza, 252 UNRWA schools serve more than 240,400 students.

European and Arab countries have pledged to protect the agency and Germany promised a significant increase in financial backing. Jordan has already announced plans for an emergency fundraising conference on the sidelines of the UN general assembly in New York later this month.

The “camps” supported by UNRWA have been around for nearly 70 years, and most are more like villages or shanty-towns than tented camps used by those who have fled homes more recently. They have permanent buildings but often few services.

Many of those who live there now and are supported by UNRWA are second-, third-, and even fourth-generation descendants of about 700,000 Palestinians who fled or were driven from their homes around the time when the state of Israel was formed in 1948.

Palestinians call that exodus the Nakba – or “catastrophe” – and demand the right of return for themselves and descendants to modern-day Israel.

In contrast to UN practice, some Trump advisors and supporters say the descendants of Palestinian refugees living in countries like Syria should not be considered refugees. They include his ambassador to Israel, David Friedman, who has written about “so-called ‘refugees’ from other countries, who have never spent a day of their lives in Israel”.

Washington said that to get its funding back, UNRWA needed to make reforms, but did not specify what they were. It also said the Palestinians should renew peace talks with Israel.

UNRWA rejected the criticisms of its work, which it pointed out had been endorsed by the World Bank, and recently approved by the same US administration now cutting it off.

The decision was issued during the Jewish sabbath, and there was no immediate comment from Israel. However the Israeli prime minister, Benjamin Netanyahu, has been a fierce critic of the agency, arguing that it should be abolished and its responsibilities taken over by the main UN refugee agency.

Opposition lawmaker Yair Lapid praised the US move on Twitter, attacked UNRWA and described those it supported as “fake refugees”.

One Gaza resident said the US move might increase suffering but would not dampen their desire to return to family lands.

“I do not know what will happen to us in Gaza. We have enough calamities to endure,” said Samir Abu Riala, 56. “If they want to abolish the right of return, this is an illusion. I am a refugee who was born in a refugee camp and we will not stop receiving aid as long as we stay here as refugees. When we get back to our land they can stop helping.”