The Trump administration announced on Friday it will cease all remaining funding of an agency providing services to more than five million Palestinian refugees. It is a reversal of years of U.S. policy on a core issue of the Israeli Palestinian conflict.

"The United States will no longer commit further funding to this irredeemably flawed operation," State Department spokeswoman, Heather Nauert said in a statement.

In previous years the U.S. has provided more than a $350 million --about a third of the annual budget of the United Nations Relief and Works Agency. The organization uses the funds to run schools and clinics for Palestinian refugees in occupied territories — the West Bank and Gaza — as well as Jordan, Syria and Lebanon.

White House withdrawal of support has been expected for some time. It had suspended most of the aid in January, after making a $60 million contribution. At the time, officials said the department was reassessing future aid and called on other countries to take on greater financial responsibility.

"We made it clear that the United States was no longer willing to shoulder the very disproportionate share of the burden of UNRWA's costs that we had assumed for many years," Nauert said in the statement.

In recent months, neighboring Arab and European countries have pledged to protect the aid organization. And, just hours before the State Department announcement, Germany agreed to significantly boost funding.

As AP reported:

"Hundreds of thousands of Palestinians fled or were forced from their homes during the war that led to Israel's establishment in 1948. Today, there are an estimated 5 million refugees and their descendants, mostly scattered across the region — a figure that has become a point of contention. Palestinian leaders assert the right of those refugees to return to land now under Israeli control."

The Times of Israel reported, "Jordan said Thursday it would host a fundraiser at the United Nations headquarters in New York next month to keep UNRWA afloat."

But those efforts appear to have done little to assuage the administration's concerns over the agency's fundamental business model, which it called "simply unsustainable" and described as being in "crisis mode for many years.

Palestinians have accused the White House of using the agency — and the welfare of refugees — as a bargaining chip in an attempt to pressure Palestinian leadership into a U.S.-brokered peace deal with Israel. Palestinian leaders have cut contact with the U.S. since the Trump administration backed Israel's claim of Jerusalem as its capital. Palestinians want part of the city for a capitol for their future state.

Aaron David Miller, a former U.S. negotiator in Mideast peace talks, warned on Twitter, the cuts could lead to instability that end up costing Israel.

"Defunding UNWRA — whatever its flaws — is a mistake," Miller wrote. "It will harm Israeli security; create openings for Hamas on the West Bank; and create a situation in which Israel will be stuck — one way or the other — with the check."

The State Department did not address concerns that the US may try to pressure the United Nations into reducing the number of Palestinians given refugee status. But Nauert said the U.S. is concerned about the impact of its funding cuts on quote "innocent Palestinians" – and suggested it may give direct aid instead.

"The United States will intensify dialogue with the United Nations, host governments, and international stakeholders about new models and new approaches," she said in the statement.

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