U.S. Weighs Terrorism-Related Sanctions on UNRWA

The Trump administration is holding advanced internal discussions on whether to impose terrorism-related sanctions on the U.N. Palestinian refugee agency UNRWA, Reuters reported Wednesday. No final decision has been made, but the debate has accelerated in recent weeks inside the U.S. State Department.

UNRWA is the primary humanitarian provider in Gaza and operates extensively in Judea and Samaria, Lebanon, Jordan and Syria. Sanctioning the agency could reshape U.S. policy toward Palestinian institutions and disrupt core relief operations at a sensitive moment in Gaza.

UNRWA’s broad presence across the Middle East has long placed it at the center of political and security controversy. Over the past two years, Israel uncovered extensive evidence of deep entanglement between the agency and Hamas, including hundreds of UNRWA employees cooperating with the group, dozens identified as active terrorists, and facilities in Gaza used to store weapons, ammunition and rockets. These findings led Washington to halt all UNRWA funding in January 2024 after additional documentation showed several agency staff participated in the Oct. 7 Hamas massacre. 

Israel has therefore called for UNRWA to be dismantled, arguing that the agency became intertwined with Hamas governance and helped perpetuate the Palestinian refugee problem. In January, Israel formally banned UNRWA operations on its territory, including East Jerusalem, as further instances of Hamas activity inside UNRWA institutions came to light. More than 370 UNRWA workers have been killed during the war, highlighting the scale of combat around the agency’s installations.

Against this backdrop, U.S. officials are evaluating several sanctioning options. According to Reuters, discussions have included the possibility of even designating UNRWA as a Foreign Terrorist Organization, one of Washington’s most severe classifications, as well as more targeted sanctions against specific individuals or branches of the agency. An FTO designation would financially isolate UNRWA and could cripple its operations across the region. Officials have not settled on a final approach, nor on whether any action would target the entire organization or only specific components.

Inside the administration, the process has exposed a sharp divide. Politically appointed officials are leading the push for terrorism-related sanctions, citing deep concerns about UNRWA’s activities in Gaza. But many career diplomats and legal advisers are urging caution, warning that such measures could trigger major humanitarian problems and raise complex legal issues. 

UNRWA has pushed back strongly on the U.S. discussions. William Deere, who heads the agency’s Washington office, said UNRWA would be “disappointed” if an FTO designation were under consideration, calling such a move “unprecedented and unwarranted.” He added that four independent reviews since January 2024 concluded that UNRWA remains an “indispensable, neutral, humanitarian actor.” A State Department official, however, described UNRWA as “a corrupt organization with a proven track record of aiding and abetting terrorists,” saying that “everything is on the table” and that no final decisions have been reached.

With dozens of U.S. allies continuing to fund UNRWA, Washington has not clarified whether sanctions would affect foreign donors or how such measures would be enforced. For now, the internal debate continues, and any designation would mark a major shift in U.S. policy with significant implications for humanitarian relief and regional diplomacy.