The Palestinians are extremely upset by the Donald Trump administration’s decision to cut $200 million in aid they get from the United States. A small part of this aid budget is designated for the Palestinian Authority (PA) itself — specifically for security coordination with Israel. Most, however, is funneled by USAID — the US State Department’s foreign aid arm — directly to Palestinian and international projects for infrastructure and agricultural and industrial development in the West Bank and Gaza Strip.

The US administration is hoping that the aid cut will force the Palestinian leadership to stop paying the families of Palestinians jailed in Israel for security-related offenses or those killed in terror attacks against Israelis; Palestinian President Mahmoud Abbas has pledged, however, that he would not cut these expenditures even if "we are left with one penny." The administration also hopes, in vain, that a blow to its coffers would force the PA to renew the ties it severed with Washington over the relocation of the US Embassy from Tel Aviv to Jerusalem in May. The Palestinians will not put up with anything resembling a sellout of their principles.

On the other hand, drying up the PA’s funding could lead Abbas to “hand over the keys” to Israel and letting it run the PA. The Americans have conceivably failed to consider such an option, although it may be the only one left for the Palestinian leadership. The PA cannot afford deep cuts in US aid that would leave it only with money to train its security forces and coordinate between them and Israel, bolstering its image as Israel’s sub-contractor in the occupied territories. If this ends up being the outcome of the American move, the government of Prime Minister Benjamin Netanyahu will emerge bruised.

Shortly after the September 1993 signing of the Oslo Accord between Israel and the Palestinians on the White House lawn, several countries established a donor forum — the Ad Hoc Liaison Committee — to help the PA fund economic initiatives, especially to build and upgrade infrastructure. Norway was designated head of the forum, and Israel was made a member and remains one. The aid funneled to the PA has enabled it since then to provide public services and pay the salaries of its workers. Tens of thousands of Palestinian teachers, medical personnel and others — who until then were on the payroll of the occupying state, Israel — started getting their wages from the new authority. Under the Oslo Accords, the PA was supposed to exist for five years (starting in 1994, after the signature on the Cairo Agreement) and then make way in 1999 for the institutions to be established within the framework of a permanent arrangement for the Palestinians. The PA went on to exist long past its due date, and no one is forcing it to dismantle although a permanent arrangement has not been achieved.