US weighs hitting UN Palestinian refugee agency with terrorism-related sanctions

Officials from the Trump administration have engaged in high-level discussions about imposing terrorism-related sanctions on the U.N. Palestinian refugee agency, UNRWA, according to two sources with direct knowledge of the matter. These deliberations have raised significant legal and humanitarian concerns within the U.S. State Department.

UNRWA, which operates in Gaza, the West Bank, Lebanon, Jordan, and Syria, provides essential aid, education, healthcare, social services, and shelter to millions of Palestinians.

Top U.N. officials and the U.N. Security Council have lauded UNRWA as a cornerstone of the humanitarian response in Gaza, where the ongoing war between Israel and Hamas has led to a catastrophic crisis.

However, the Trump administration has accused the agency of having ties to Hamas, an allegation that UNRWA has strongly denied.

For years, the United States was UNRWA's largest donor, but it halted funding in January 2024 after Israel accused several UNRWA staff members of involvement in the deadly Hamas attacks on October 7, 2023, which triggered the current war in Gaza. U.S. Secretary of State Marco Rubio later accused the agency in October 2024 of becoming “a subsidiary of Hamas,” a group the U.S. designated as a terrorist organization in 1997.

It remains unclear whether current U.S. discussions are aimed at sanctioning the entire agency or specific individuals or operations within UNRWA. U.S. officials are still debating what type of sanctions they might implement.

Among the possibilities discussed within the State Department is the potential designation of UNRWA as a “Foreign Terrorist Organization” (FTO), a move that would severely isolate the agency financially. However, it is uncertain whether this option is still under serious consideration.

A broad move to sanction UNRWA could disrupt vital refugee relief efforts and cripple the agency, which is already grappling with a major funding crisis.

A Move That Could Be Unprecedented

Sanctioning UNRWA on terrorism-related grounds would be unprecedented, especially considering the United States is a founding member and host country of the United Nations, which established UNRWA in 1949.

William Deere, the director of UNRWA’s Washington office, expressed disappointment at the possibility of an FTO designation. He called such a move “both unprecedented and unwarranted.”

“Since January 2024, four independent entities—including the U.S. National Intelligence Council—have investigated UNRWA's neutrality. While conducted at different times and from different perspectives, they all reached the same conclusion: UNRWA is an indispensable, neutral humanitarian actor,” Deere said.

In response to a request for comment, a State Department official labeled UNRWA as “a corrupt organization with a proven track record of aiding and abetting terrorists.”

“Everything is on the table,” the official added. “No final decisions have yet been made.”

The White House did not respond to requests for comment.

The State Department has a range of sanctioning options at its disposal, which typically involve asset freezes and travel bans targeting specific individuals or entities. A Foreign Terrorist Organization (FTO) designation would be one of the most severe measures available to the U.S. and is typically reserved for groups like ISIS and al-Qaeda that are responsible for mass civilian deaths.

Implications for International Aid and U.S. Allies

Several key U.S. allies provide funding to UNRWA, raising questions about whether foreign governments or officials could face sanctions for continuing to support the agency if the U.S. targets it for terrorism-related reasons.

The United Nations has confirmed that at least nine UNRWA staff members were implicated in the October 7, 2023, Hamas attack and have been fired. A Hamas commander in Lebanon—who was killed by Israeli forces in September—was also found to have worked for UNRWA. The U.N. has pledged to investigate all such claims and has repeatedly requested evidence from Israel, which has not been provided.

Humanitarian and Legal Concerns Grow

Sources familiar with the ongoing discussions about UNRWA have expressed concerns regarding the potential legal and humanitarian consequences of sanctions. Given the agency’s critical role in aiding displaced Palestinians, these concerns have fueled debate within the U.S. State Department.

Politically-appointed staff at the State Department, aligned with Trump’s administration, have largely led the push for terrorism-related sanctions against UNRWA. However, career State Department officials—including those responsible for drafting sanctions language—have pushed back against these proposals.

In recent weeks, discussions on potential sanctions have taken place within the State Department’s Bureau of Counterterrorism and its Policy Planning Staff, a powerful policymaking body within the agency. Gregory LoGerfo, the nominee for the department’s top counterterrorism post, has recused himself from these discussions as he awaits Senate confirmation.

Israeli Prime Minister Benjamin Netanyahu has long called for the dismantling of UNRWA, accusing it of promoting anti-Israeli sentiment. Since January 30, Israel has banned the operation of UNRWA on Israeli land—including East Jerusalem, which Israel annexed, a move not recognized by the international community—and has severed contact with the agency.

Israel and Hamas signed a U.S.-brokered peace deal in October, but ceasefire violations have been frequent, and progress on broader terms of the agreement has been slow. Over 370 UNRWA workers have been killed in Gaza during the ongoing conflict, according to the agency. -Gram Slattery and Humeyra Pamuk/Reuters