By Maayan Lubell and Nidal al-Mughrabi
JERUSALEM/GAZA (Reuters) - The head of the U.N. agency that provides aid to Palestinian refugees appealed on Wednesday for world donations after the United States withheld about half its planned funding for the organization, a move he said risks instability in the region.
Washington said on Tuesday it would provide $60 million to the U.N. Relief and Welfare Agency while keeping back a further $65 million for now. The U.S. State Department said UNRWA needed to make unspecified reforms.
Palestinians, already angered by U.S. President Donald Trump's Dec. 6 recognition of Jerusalem as Israel's capital, denounced the decision, which could deepen hardship in the Gaza Strip where UNRWA helps much of its population of 2 million.
UNRWA Commissioner-General Pierre Krähenbüh said he would appeal to other donor nations for money and launch "a global fundraising campaign" aimed at keeping the agency's schools and clinics for refugees open through 2018 and beyond.
"At stake is the dignity and human security of millions of Palestine refugees, in need of emergency food assistance and other support in Jordan, Lebanon, Syria, and the West Bank and Gaza Strip," he said in a statement.
Krähenbüh said 525,000 boys and girls in 700 UNRWA schools could be affected by the fund cut, as well as Palestinian access to primary health care, but he pledged to keep facilities open through 2018 and beyond.
"The reduced contribution also impacts regional security at a time when the Middle East faces multiple risks and threats, notably that of further radicalization," he said.
UNRWA was established by the U.N. General Assembly in 1949 after hundreds of thousands of Palestinians fled or were expelled from their homes in the 1948 war that followed Israel’s creation. It says it currently aids five million registered Palestinian refugees in the Middle East.
In a Twitter post on Jan. 2, Trump said that Washington gives the Palestinians "HUNDRED OF MILLIONS OF DOLLARS a year and get no appreciation or respect." Trump added that "with the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them?"
While U.S. officials did not link the decision to Trump's tweet, they made a point often advanced by him, saying the United States had been UNRWA’s single largest donor for decades.
Trump's aides initially debated whether to cut off all UNRWA aid, an unidentified U.S. official said, but those opposed argued that could further destabilize the region.
Hanan Ashrawi, a senior official in the Palestine Liberation Organization (PLO) said the White House was "targeting the most vulnerable segment of the Palestinian people".
Israeli Prime Minister Benjamin Netanyahu, who has called for a gradual cut in UNRWA funding and transferring its responsibilities to the U.N. global refugee agency, voiced measured support for the U.S. step.
But he appeared to acknowledge it could leave Israel - which maintains tight restrictions on the movement of people and goods across its border with Hamas Islamist-controlled Gaza - with a potential humanitarian crisis on its doorstep.
Netanyahu this month proposed gradually dismantling UNRWA, arguing it "perpetuates the Palestinian problem", and moving funds to the UNHCR agency. UNRWA said the Palestinian refugee crisis stems from the failure of Israel and the Palestinians to agree a solution for Palestinian refugees.
Asked on Wednesday by Israeli reporters accompanying him on a diplomatic trip to India whether he supports the U.S. funding cut, Netanyahu said: "Of course, but I still suggest, because I think there are certain needs, to do what I have said ... every step taken also contains some risk."
(Writing by Maayan Lubell; Editing by Jeffrey Heller, William Maclean)