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As UNRWA's spokesperson Chris Gunness announced on 17 January, other than a $60 million payment to prevent the agency from running out of money by the end of the month, the US will no longer contribute to the agency's budget.

He stated that this will potentially lead to "dramatically reduced contribution results in the most severe funding crisis in the history of the agency". The US also announced it UNRWA with the $45 million it promised as part of an emergency appeal.

The implications of this move are wide.

In the first instance, the proposed size of the reduction is massive. The US donated in funding over 2016, around a third of UNRWA's total donor budget. For the agency to operate at around two-thirds of its capacity could be catastrophic.

The UN agency specifically dedicated to Palestinian refugees, which came into existence before the Refugee Convention of 1951, in Syria, Lebanon, Jordan, the West Bank and Gaza. Palestinian refugees rely on UNRWA to provide them with health and educational facilities, among other necessities such as food parcels.

In fact, over half of Gaza's population is on UNRWA's help, and withdrawing support could put more strain on Lebanon, Syria and Jordan.

A in 2015 led to UNRWA imposing austerity measures and the continuation of its services was threatened, leading to fears the school year would be delayed.

Since the announcement, the UNRWA has already taken preemptive steps, laying off workers in educational facilities.

We already know what happens when we deny children an education. The fear of more time on the streets than in school has been repeated time and time again.

What's more, further cuts will exacerbate the already dire conditions in the camps. UNRWA workers have stated they'll protest, adding to existing public dissatisfaction after Trump declared Jerusalem Israel's capital.

Read more: US to withhold $65 million from UN Palestinian refugee agency

While the US might deny it, all signs point to the fact that withdrawal of aid is a proverbial gun to the head of the Palestinians.

As President Trump tweeted:

"... we pay the Palestinians HUNDRED OF MILLIONS OF DOLLARS a year and get no appreciation or respect. They don't even want to negotiate a long overdue...

... peace treaty with Israel. We have taken Jerusalem, the toughest part of the negotiation, off the table, but Israel, for that, would have had to pay more. But with the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them?"

To answer Trump's question, perhaps they should continue because in Gaza alone, unemployment is at heinous levels of . The enclave has also endured a six-month , the already fragile health infrastructure.

The UNRWA has long been criticised by Israel, and there is evidence that Israeli army attacks have UNRWA schools in the past.

For Netanyahu, Trump's announcement comes as a win, as he  to see the UNRWA dismantled and replaced by the UNHCR. 

The significance of such a move is linked to Palestinians' right of return to a Palestinian state.

The UNRWA body allows Palestinian refugee men to transfer their refugee status to subsequent generations, thereby maintaining the right of return for Palestinian refugees. 

While the right of return is protected by international law, and there is a question mark over whether this right for many Palestinian refugees becomes untenable if they are no longer under the operational mandate of the UNRWA.

Along with the announcement of the cut in funding, came a form of conditionality, assembled as a kind of threat:

"We would like to see some reforms be made,"  State Department spokeswoman Heather Nauert. Referring to "the way the agency operates and is funded", the US suggested that more countries should put up the money.

If the US does want to see UNRWA gone, or is trying to create leverage over Palestinians, their move may backfire. Belgium has so far pledged $23million donation to the agency.

And as seen with the funding crisis of 2015, within four months the UNRWA received  of its emergency funding appeal.

Without US funding, the EU becomes the biggest donor and Gulf countries may contribute, too. As we saw with the vote on Israel's capital, radical measures proposed by Trump that could roll back years of diplomacy and peace efforts are just not supported by the wider international community.

The US may therefore have less political leverage that it might think, meaning that the UNRWA's future may yet prevail.

But in the short-term, austerity measures and pre-emptive cuts will mean ordinary people and crucial services suffer unfairly. This will harness further dissatisfaction that could cause instability in the region. And that is not good news for anyone.

Sophia Akram is a researcher and communications professional with a special interest in human rights particularly across the Middle East. 

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Opinions expressed in this article remain those of the author and do not necessarily represent those of °®Âþµº, its editorial board or staff.