The United States is cutting more than $200 million in aid to the Palestinians, the State Department said on Friday.
The State Department notified Congress of the decision in a brief, three-paragraph notice sent first to lawmakers and then to reporters on Friday.
The move comes as U.S. President Donald Trump and his Middle East pointmen, Jared Kushner and Jason Greenblatt, staff up their office to prepare for the rollout of a much-vaunted but as yet unclear peace plan for Israel and the Palestinians.
Without elaborating, a senior State Department official said that the funds, originally planned for programs in the West Bank and the Gaza Strip, would be diverted to fund "high-priority projects elsewhere."
"We have undertaken a review of U.S. assistance to the Palestinian Authority and in the West Bank and Gaza to ensure these funds are spent in accordance with U.S. national interests and provide value to the U.S. taxpayer," the official said in a statement.
"As a result of that review, [and] at the direction of the president, we will redirect more than $200 million in FY2017 Economic Support Funds originally planned for programs in the West Bank and Gaza."
Asked where the money would be redirected and whether it would go to other Palestinian projects, another State Department official said, "We will work with Congress to redirect these funds to other policy priorities."
Palestinian Authority President Mahmoud Abbas' spokesman responded to the U.S. announcement Saturday, asserting that the decision was intended to pressure the Palestinians to abandon their claim to Jerusalem.
Spokesman Nabil Abu Rudeineh said the move was part of ongoing political and financial pressure on the Palestinian leadership, but added that the Americans must know that the Palestinians will not agree to any peace agreement without east Jerusalem as the capital of a Palestinian state.
One main point of contention is the PA's policy of paying stipends to the families of Palestinian terrorists. Israel and the Trump administration have repeatedly demanded that those payments from a so-called "martyrs' fund" be halted because they encourage terrorism. Abbas has so far refused to do so.
Ramallah has angered the White House by boycotting U.S.-led peace efforts following Trump's decision to recognize Jerusalem as Israel's capital and move the embassy there, reversing decades of U.S. policy.
The status of Jerusalem – home to sites holy to the Jews, Christians and Muslims – has consistently been one of the biggest challenges preventing a peace agreement between Israel and the Palestinians.
Palestinians envision east Jerusalem as the future capital of an independent state. Israel says Jerusalem, including its eastern part, is its eternal and indivisible capital.
Trump's son-in-law and senior adviser Jared Kushner is leading an effort to craft a peace plan meant to restart negotiations between Israel and the Palestinians to end the decadeslong conflict. A timetable for when the initiative will be rolled out has not yet been announced.
Meanwhile Saturday, Palestine Liberation Organization Executive Committee member Hanan Ashrawi accused the Trump administration of using "cheap blackmail as a political tool," referring to the aid cut.
"The Palestinian people and leadership will not be intimidated and will not succumb to coercion," she said.
In a statement, Ambassador Husam Zomlot, head of the PLO General Delegation to the United States, said,"Weaponizing humanitarian and developmental aid as political blackmail does not work."
In January, the U.S. announced it would withhold $65 million of the $125 million it had planned to send to the United Nations agency for Palestinian refugees, which is funded almost entirely by voluntary contributions from U.N. states, with the United States being the largest contributor to date.
The U.N. Relief and Works Agency for Palestine Refugees has warned that the cuts could exacerbate the situation in Gaza, a coastal enclave that is under blockade by both Israel and Egypt.
During a three-day trip to Jerusalem last week, U.S. National Security Adviser John Bolton said UNRWA was "a failed mechanism" that violated standard international law on the status of refugees.
"UNRWA's program is the only one in history based on the assumption that refugee status is hereditary, and I think it is long overdue that we have taken steps to reduce funding," Bolton said.
UNRWA was founded in 1949 after some 700,000 Palestinians fled their homes during Israel's War of Independence. It helps around 5 million Palestinian refugees, a figure that includes descendants of those displaced by the fighting.
Jordan, which hosts the largest number of Palestinian refugees in the Middle East outside the Palestinian territories, warned this month that a severe financial shortfall facing UNRWA could have a "catastrophic" impact on the lives of millions of refugees in the region.
However, several former U.S. officials said that cutting back aid money to the Palestinians would only strengthen Abbas' more radical rivals in the Hamas terrorist group that rules Gaza.
"The U.S. is ceding space to Hamas in Gaza," tweeted Dave Harden, until recently the USAID director in the Palestinian territories. "No security professional recommends an aid cut off in Gaza. None."
U.S. Senator Patrick Leahy, a Democrat, also criticized the Trump administration's decision.
"Inhabitants of Gaza are already suffering severe hardships under the tyranny of Hamas and border restrictions imposed by Israel. It is the Palestinian people, virtual prisoners in an increasingly volatile conflict, who will most directly suffer the consequences of this callous and ill-advised attempt to respond to Israel's security concerns."
J Street, a left-wing Jewish lobby group, called the Trump administration's move a "moral outrage and a major strategic blunder."
