SHATI REFUGEE CAMP, Gaza Strip -- Mahmoud al-Qouqa can't imagine life without the three sacks of flour, cooking oil and other staples he receives from the United Nations every three months.

Living with 25 relatives in a crowded home in this teeming Gaza Strip slum, the meager rations provided by UNRWA, the U.N. agency for Palestinian refugee families, are the last thing keeping his family afloat in the territory hard hit by years of poverty and conflict. But that could be in danger as the United States, UNRWA's biggest donor, threatens to curtail funding.

"It will be like a disaster and no one can predict what the reaction will be," al-Qouqa said.

Across the Middle East, millions of people who depend on UNRWA are bracing for the worst. The expected cut could also add instability to struggling host countries already coping with spillover from other regional crises.

UNRWA was established in the wake of the 1948 Mideast war surrounding Israel's creation. An estimated 700,000 Palestinians fled or were forced from their homes in the fighting.

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In the absence of a solution for these refugees, the U.N. General Assembly has repeatedly renewed UNRWA's mandate, the original refugee camps have turned into concrete slums and more than 5 million refugees and their descendants now rely on the agency for services including education, health care and food. The largest populations are in Gaza, the West Bank, Jordan and Lebanon.

A Palestinian man loads a horse-pulled cart with food donations outside the United Nations food distribution centre in Gaza City on January 15, 2018. Getty

Seen by the Palestinians and most of the international community as providing a valuable safety net, UNRWA is viewed far differently by Israel.

Prime Minister Benjamin Netanyahu accuses the agency of perpetuating the conflict by helping promote an unrealistic dream that these people have the "right of return" to long-lost properties in what is now Israel.

"UNRWA is part of the problem, not part of the solution," he told foreign journalists last week. Noting that the Palestinians are the only group served by a specific refugee agency, he said UNRWA should be abolished and its responsibilities taken over by the main U.N. refugee agency.

Some in Israel have even tougher criticism, accusing UNRWA of teaching hatred of Israel in its classrooms and tolerating or assisting Hamas militants in Gaza.

Blaming the Palestinians for lack of progress in Mideast peace efforts, President Donald Trump has threatened to cut American assistance to the Palestinians. UNRWA would be the first to be affected.

The U.S. provides about $355 million a year to UNRWA, roughly one-third of its budget.

U.S. officials in Washington said this week the administration is preparing to withhold tens of millions of dollars from the year's first contribution, cutting a planned $125 million installment by half or perhaps entirely. The decision could come as early as Tuesday.

Matthias Schmale, UNRWA's director in Gaza, said Washington has not informed the agency of any changes. However, "we are worried because of the statements ... in the media and the fact that the money hasn't arrived yet," he said.

It's not only Pakistan that we pay billions of dollars to for nothing, but also many other countries, and others. As an example, we pay the Palestinians HUNDRED OF MILLIONS OF DOLLARS a year and get no appreciation or respect. They don’t even want to negotiate a long overdue... — Donald J. Trump (@realDonaldTrump) January 2, 2018

...peace treaty with Israel. We have taken Jerusalem, the toughest part of the negotiation, off the table, but Israel, for that, would have had to pay more. But with the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them? — Donald J. Trump (@realDonaldTrump) January 2, 2018

Schmale dismissed the Israeli criticisms, saying that individuals who spread incitement or aid militants are isolated cases and promptly punished. And he said Netanyahu's criticism should be directed at the U.N. General Assembly, which sets UNRWA's mandate, not the agency itself.

Any cut in U.S. aid could ripple across the region with potentially unintended consequences.

Gaza may be the most challenging of all of UNRWA's operating areas. Two-thirds of Gaza's 2 million people qualify for services, and its role is amplified given the poor state of the economy, which has been hit hard by three wars with Israel and an Israeli-Egyptian blockade since the Hamas militant group seized power over a decade ago. Unemployment is 43 percent and the poverty rate is 38 percent, according to the official Palestinian statistics office.

"Nowhere else are we the biggest service provider for the population of the entire territory," Schmale said. He said UNRWA provides food assistance to 1 million Gazans, calling it "an expression of collective shame for the international community."

With more than 12,500 teachers, nurses and other staff, UNRWA is Gaza's largest non-governmental employer. It is also involved in postwar reconstruction projects.

The dire situation in Gaza is evident inside al-Qouqa's home, which is so cramped the family has made sleeping spaces with wood boards and fabric. Two male family members are unemployed. Two others are Hamas civil servants and get paid only intermittently by the cash-strapped movement.

At 72, al-Qouqa is worried about his grandchildren. "If UNRWA provides them with bread, they can remain patient. But if it was cut, what will they become? They will become thieves, criminals and a burden on society," he said. Many believe Hamas, which administers schools and social services in Gaza, will step in to fill the void.

Jordan, a crucial ally in the U.S.-led battle against Islamic militants, is home to the largest number of Palestinian refugees and their descendants - with nearly 2.2 million people eligible for UNRWA services. This has turned the U.N. agency into a major contributor to social welfare services in the country, which also hosts hundreds of thousands of Syrians displaced by war.

U.S. aid cuts could heighten the threat of instability in Jordan, which is grappling with a worsening economy hurt by the spillover from conflict in neighboring Syria and Iraq. More than one-third of Jordan's young people are without jobs, turning them into potential targets for recruitment by extremists.

Syrian refugee children play on a street in the Palestinian Shatila refugee camp, on the southern outskirts of the Lebanese capital Beirut, Sept. 1, 2017. Getty

Most of the Palestinians eligible for UNRWA services in Jordan hold Jordanian citizenship, and some argue that this has ended their refugee status. But most maintain that UNRWA services are vital to propping up an important ally.

UNRWA's services are also vital in Lebanon, where Palestinians are prohibited from working in skilled professions and owning property.

Lebanon is the least-welcoming Arab country to Palestinian refugees, because it does not want Palestinians to settle and because it does not want the refugees to upset the country's delicate sectarian balance. Camps in several cities are ringed by concrete barriers and Lebanese security forces use checkpoints to control who enters and leaves. A recent census found 175,000 Palestinian refugees or their descendants living in the country.

The civil war in Syria has made many Palestinians refugees twice over. Some 32,000 Palestinians who were living in Syria fled to Lebanon, according to UNRWA. In Syria, Palestinians enjoyed the right to own property and to work in all professions. They are not entitled to the same in Lebanon.

Balkees Hameed, 33, arrived in 2013 with her husband, two children and in-laws from Damascus, where their apartment was damaged by rocket fire. The family depends on UNRWA assistance to rent a one-bedroom apartment in a ramshackle building in Bourj al-Barajneh, a Beirut camp. Her husband wipes tables at a restaurant outside the camp. Hameed, like all Palestinians, was painfully aware of the rumors coming out of Washington.

"We are already defeated and now they want to oppress us some more?" she asked.

While more than 5 million Syrian refugees worldwide are entitled to assistance from the U.N.'s general refugee relief agency, Palestinians are barred from it under the logic that UNRWA serves them. But UNRWA in Lebanon is chronically underfunded, and the wave of Palestinians arriving from Syria has strained its finances even further.

"What UNRWA provides is not even a quarter of what a Palestinian refugee needs," said Ramy Mansour, 34, who fled to Lebanon from the Yarmouk refugee camp in Damascus in 2013. "Take everything and return us to our homes. We don't want any assistance or anything, just return us to our country."