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US President  on Wednesday restored aid to the  to a tune of $235 million, upsetting ally , as he promised to press for a two-state solution.

In his sharpest break yet on the conflict from the staunchly pro-Israel Donald Trump, Biden said the United States would resume funding for the UN agency for Palestinian refugees that his predecessor had severed.

The State Department said the United States would contribute $150 million to the UN agency and also offer $75 million in economic and development assistance for the West Bank and Gaza as well as $10 million for peacebuilding efforts.

In a call with Jordan's King Abdullah II, a longstanding US ally who recently faced down , Biden "affirmed that the United States supports a two-state solution to the Israeli-Palestinian conflict," a White House statement said.

Secretary of State Antony Blinken said that the US assistance to the Palestinians "serves important US interests and values" as "a means to advance towards a negotiated two-state solution."

"It provides critical relief to those in great need, fosters economic development and supports Israeli-Palestinian understanding, security coordination and stability," Blinken said in a statement.

Israel, which has held off on criticism of Biden, denounced the assistance to the UN Relief and Works Agency for Palestine Refugees in the Near East, or UNRWA.

"We believe that this U.N. agency for so-called 'refugees' should not exist in its current format," said Gilad Erdan, the Israeli ambassador to the United States.

Israel argues that the education provided by the UN-backed schools includes incitement against the Jewish state.

"I have expressed my disappointment and objection to the decision to renew UNRWA's funding without first ensuring that certain reforms, including stopping the incitement and removing anti-Semitic content from its educational curriculum, are carried out," Erdan said.

The Israeli anger comes as the United States takes part in indirect, European-led in Vienna with Iran on returning to a denuclearization deal which was bitterly opposed by Prime Minister Benjamin Netanyahu.

'Right signal'

UN spokesman Stephane Dujarric said the world body would "very much welcome" the restored US assistance.

German Foreign Minister Heiko Maas said Washington's renewed support for UNRWA "sends the right signal."

"Since the challenges have only become greater in a time of corona, the announcement by the US government comes at the right time for those affected in the region," Maas said in a statement.

The new funding is in addition to $15 million earlier announced by the United States in Covid assistance to the Palestinians amid criticism that Israel, a leader in vaccinating its own people, has not taken similar initiatives in territories under its occupation.

Israel argues that vaccination is the responsibility of the Palestinian Authority.

UNRWA once counted on the United States as its top donor but has been facing a shortfall since Trump withdrew funds from 2018 on the argument that the refugees, some in camps for generations, should be resettled.

The agency said its needs have been rising due to Covid and the hardships faced by Palestinians living in war-battered Syria, troubled Lebanon and Jordan.

UNRWA said that it entered 2021 with liabilities of $75 million from the last financial year and that its annual deficit was expected to reach $200 million in the current year.

The Biden administration has been gradually restoring relations and support for the Palestinians.

Shortly after Biden's inauguration in January, the United States said it would restore the Palestine Liberation Organization's liaison office that was shut down by Trump.

But Biden has held off on any major peace initiative, with even supports of a two-state solution expecting near-term chances for a breakthrough to be slim, especially amid turbulence in Israel following its latest election.

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