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WASHINGTON – The Trump administration informed the UN Relief and Works Agency on Tuesday that it was cutting tens of millions of dollars in aid to the organization, amid an escalating diplomatic crisis between Washington and Ramallah, a US official told The Jerusalem Post.President Donald Trump heeded the advice of Secretary of State Rex Tillerson, Secretary of Defense James Mattis and National Security Adviser H.R. McMaster – in addition to that of the Israeli government – and agreed to transfer $60 million to the UN body for now, as opposed to cutting all funding outright. But the remaining pledge of $65m. has been withheld “for future consideration,” according to a letter sent to the agency.While the policy decision came out of the State Department, which faced a UN dues payment this week, the question of how to proceed became an interagency debate among Trump’s top foreign policy staff and involved the president himself. Only one of those figures – Nikki Haley, Trump’s ambassador to the UN – advocated for a full and immediate aid cut.UNRWA is a unique international body originally set up to assist hundreds of thousands of refugees displaced by the Arab war against the establishment of the State of Israel. Now, 70 years later, the organization offers aid the descendants of those refugees, numbering in the millions.Informing UNRWA of its decision, the Trump administration called for a “fundamental reexamination” of the agency.UN Secretary-General Antonio Guterres expressed alarm at the consequences of such a move. “I’m very concerned,” he told reporters on Tuesday.A dramatic slashing of US aid to UNRWA is yet another blow to the Trump administration’s fast-deteriorating relationship with the Palestinian Authority, after the White House within the span of months threatened to shut the PLO’s offices in Washington for its refusal to hold peace talks with Israel; recognized Jerusalem as Israel’s capital and vowed to move the US Embassy there; declared the Western Wall as presumed Israeli territory in any final-status negotiations; condemned a PA program that compensates the families of Palestinian terrorists and their families; left UNESCO; kept quiet on Israeli settlement growth relative to prior administrations; and taunted PA leadership with sweeping aid cuts via Twitter.PLO Executive Committee Member Mustafa Barghouti accused Trump of trying “to liquidate the rights of Palestinian refugees.”“This is not merely a decision to cut money. This is a political decision that is aiming to liquidate the rights of the Palestinian refugees,” Barghouti told the Post in a phone call, adding that “it will not affect the determination of the Palestinians to keep the issue of refugees alive.”Barghouti also said the international community has “an obligation to find an alternative to the funding” Trump cut to UNRWA.Ambassador to the UN Danny Danon said on Tuesday: “UNRWA has proven time and again to be an agency that misuses the humanitarian aid of the international community and instead supports anti-Israel propaganda, perpetuates the plight of Palestinian refugees and encourages hate.“Just over the last year alone, UNRWA officials were elected to the leadership of Hamas in the Gaza Strip, UNRWA schools denied the existence of Israel, and terror tunnels were dug under UNRWA facilities. It is time for this absurdity to end and for humanitarian funds to be directed toward their intended purpose – the welfare of refugees,” the ambassador said.PA President Mahmoud Abbas effectively threw in the towel over the weekend, offering a scathing speech targeting the US administration generally and Trump personally by dismissing their peace effort and calling for his “house to be destroyed.”“Damn your money!” Abbas declared.Israeli politicians and Jewish American groups decried the speech as a racist diatribe that revealed Abbas’s true colors. The speech included conspiracy theories and fundamental questioning of the existence and justification for a Jewish state.But the US “peace team,” tasked with negotiating a comprehensive agreement between Israel and the Palestinians, declined to respond. That team was not involved in the UNRWA decision, although its members – Jared Kushner, White House adviser; Jason Greenblatt, special representative for international negotiations; and David Friedman, US ambassador to Israel – understand the consequences that any cut of Palestinian aid will have on their effort.Greenblatt, for one, has strongly advocated for the economic revitalization of the Gaza Strip, which receives the lion’s share of UNRWA aid.Despite acknowledging a crisis of trust with the PA, the White House team still plans to proceed with the release of detailed policy proposals addressing the thorniest sticking points in the Israeli-Palestinian conflict.Senior administration officials told the Post that their critics will be surprised by its contents, which they expect will appeal to Palestinians and draw them back to the table.“We still want to continue to have conversations and have a peace process,” one US official said.The officials declined to offer a timeline for the release of their plan.Adam Rasgon contributed to this report.