The Trump administration announced Friday that it is permanently slashing funds to the United Nations’ refugee agency, in a move that security officials worry could spark Palestinian unrest but that the administration says is part of a wider U.S. strategy.
Earlier this year, the Trump administration froze most of its support to the U.N. Relief and Works Agency, the agency that aids Palestinian refugees, providing $60 million and holding back more than $300 million. Friday’s announcement stands to make the reduction permanent.
The administration wants to pressure Palestinians into talks with the Trump administration and signal U.S. displeasure with the way the organization runs.
The Palestinians, angered over administration support for Israel, are refusing to engage in talks with the U.S.
The U.S. in a separate move last week eliminated $200 million in bilateral funding to Palestinians, and is considering additional steps to pressure Palestinian leaders, including by slashing the number of Palestinians registered as refugees with UNRWA. That move would have implications for what Palestinians assert is a “right of return” to Israel.
The U.S. is UNRWA’s largest donor, and the organization has been scrambling to make up for the funding gap, with donations from Sweden, the European Union and Qatar, among others. Last year, the U.S. contributed $368 million to an overall budget of $1.24 billion.
The Trump administration move has found support in the Republican-controlled Congress, where lawmakers have pressed the U.S. to change its approach to the organization.
Arab leaders and some Western and Israeli officials fear that drastic cuts to UNRWA could spark unrest in the region, and leave thousands of students out of school. Cuts to food aid and other assistance could also trigger discontent.
“The political instrumentalization of humanitarian assistance in the context of the Middle East may well have widespread dramatic and unpredictable consequences,” said Chris Gunness, a spokesman for UNRWA.
UNRWA operates 711 schools attended by 526,000 refugee girls and boys in the Palestinian territories and neighboring countries such as Jordan and Lebanon. UNRWA also supports more than 140 primary health facilities delivering health care to refugees, and sponsors social safety net programs that distribute food and cash assistance to thousands.
Farid Abu Athera, head of the UNRWA education program in Gaza, said in an interview this week that he is looking to cut education spending so that schools can operate for the full year. Earlier this month, UNRWA said it was unsure whether it had enough funds to operate schools beyond the end of September.
Mr. Abu Athera said UNRWA is cutting psychological support programs for students and security guards.
If UNRWA schools in Gaza close, the strip’s school system will be overwhelmed, Palestinian officials in Gaza said. There are 274 UNRWA schools in Gaza with 280,000 students, and the public-school system doesn’t have the capacity to absorb them.
But the group has been criticized for wielding influence in the wider Israeli-Palestinian conflict.
Sen. Ted Cruz (R., Texas), who called the Trump administration’s move encouraging, said UNRWA officials “violate their neutrality commitments, demonize Israel, and look the other way at the activities of terror groups.”
As U.S. efforts to roll out a Middle East peace plan have stalled, the administration stands to further alienate Palestinians and Arab leaders with the funding cuts and by taking aim at Palestinians’ insistence any peace deal include a right of refugees to return to Israel.
There are more than 5 million refugees registered with UNRWA, including Palestinians who originally left what is now Israel in 1948 and their descendants.
Proposed changes to roll back those claims would need to be approved at the United Nations and would face certain opposition if raised at the U.N. General Assembly meeting in New York next month.
Many international officials have cautioned that restricting the number of Palestinian refugees under a narrower definition could leave millions of people without a state. The effort, coupled with a cut in humanitarian aid, is likely to increase economic and political pressure on neighboring countries in the Middle East already struggling to absorb a more recent influx of millions of refugees from Iraq and Syria.
“These people will not have any status,” said one foreign diplomat briefed on policy discussions in Washington, adding that countries like Jordan and Lebanon could face instability as a result of the move. “People are already in a miserable condition.”
Some in the Trump administration question the right of Palestinians to return to what is now Israel as part of a future peace agreement.
“I absolutely think we have to look at the right of return,” said Nikki Haley, U.S. envoy to the U.N., when asked at an event in Washington earlier in the week whether the claim should be taken off the table.
Write to Felicia Schwartz at Felicia.Schwartz@wsj.com and Jessica Donati at jessica.donati@wsj.com