Despite the growing criticism, Israel is standing firm in its attempt to banish the United Nations Relief and Works Agency from operating in its territory.

Since its ban came into effect on January 30, Israeli authorities have severed coordination ties with the agency, shut down schools in east Jerusalem, and effectively forced international staff to leave.

The government’s decision was largely driven by its expanding allegations that UNRWA employees hold links to terrorist organizations.

The fallout has been swift. Countries such as the United States, Canada, New Zealand, and the European Union have suspended or withdrawn funding, citing concerns over neutrality.

Beyond the political maneuvering and aid cuts, the issue has added fresh scrutiny to a decades-old debate that remains unresolved: Who qualifies as a Palestinian refugee? And should this status be inherited indefinitely – even by millionaires?

UNRWA was created shortly after the 1948 Arab-Israeli war to assist 750,000 Palestinians displaced by the conflict. Today, its registry lists over six million refugees.

Critics argue that no other refugee group in the world operates with this mandate.

“Unlike every other refugee crisis in history, Palestinian refugees don’t decrease in number – they increase. UNRWA doesn’t resettle, it perpetuates,” says Dina Rovner, legal adviser for UN Watch.​ “The result? A crisis that has lasted decades longer than any other.”

Among those classified as Palestinian refugees is Jordanian-American real estate mogul Mohamed Hadid and his five millionaire children, including supermodels Bella and Gigi Hadid. Twenty-nine-year-old Zahwa Arafat, the billionaire daughter of former Palestinian leader Yasser Arafat, also retains this status.

Under UNRWA’s unique framework, all descendants of Palestinian refugees “who lost both their home and means of livelihood in Mandate Palestine between 1946-1948 are eligible for refugee status,” regardless of wealth or nationality – a stark contrast to the Office of the United Nations High Commissioner for Refugees (UNHCR), which removes individuals from its registries once they are resettled or naturalized.

UNRWA, though, asserts that Palestinian refugee status is determined by the UN General Assembly, not the agency itself.

“Palestinian refugees were recognized under Resolution 194 before UNRWA existed, where human rights were not subjected to economic status,” says Jonathan Fowler, UNRWA’s senior communications manager. “In mass displacements, refugee status applies collectively and passes through generations, as seen with Afghan, Sudanese, and Sahrawi refugees”

Yet, the difference is striking. After WWII, millions were displaced, primarily in Europe, but around 1.5 million were resettled by temporary UN agencies before UNHCR took over in 1952. In contrast, 77 years later, UNRWA remains a permanent institution, even as many, like the 2.4 million in Jordan who hold citizenship, continue receiving its assistance.

This raises a pivotal question: Does UNRWA’s approach maintain statelessness rather than resolving it?

The controversy extends beyond definitions. Critics hold that UNRWA’s budget and staff allocation raise questions about its efficiency compared to other refugee agencies.

When first established, UNRWA’s annual budget was 110 times greater than UNHCRs. Today, it employs 30,000 staff for nearly six million refugees – a 1:200 ratio. In contrast, UNHCR, which serves around 32 million refugees globally, operates with 20,000 staff, translating to one staff member per 1,600 refugees.

“There is a clear inconsistency in how the world treats the Palestinians compared to other refugees,” says Rovner. “If they were under the UNHCR, the majority would not be considered eligible.”

Fowler counters the criticism, explaining that UNRWA’s economic and service model is fundamentally different and of significant value. “It was designed as a sustained relief and works program until a viable solution is achieved, much like the 1930s US Tennessee Valley Authority.” Moreover, he adds, “the value for money is extraordinary – hiring locals not only brings local benefits but also costs 40%-50% less than employing internationals.”

As the debate over refugee classification rages on, Israel’s reports of UNRWA’s connections to terrorism have also dominated recent discussions. Citing its intelligence findings, Israeli authorities maintain that 10% of the agency’s senior educators in Gaza have ties to Hamas or Palestinian Islamic Jihad.

“UNRWA’s response is always the same – to deflect, deny, and cover up. They never take responsibility. They claim to be a ‘humanitarian backbone’ in Gaza but promote Hamas propaganda, like it did with the Gaza famine narrative, which has been totally debunked,” charges Rovner.

However, there are also claims that UNRWA is being targeted politically, as Fowler indicates: “There’s a barrage of misinformation about who we are and who we’re not. We share all our staff lists with regional authorities, including Israel, and have never received pushback about specific employees before.”

Despite Israel’s push to dismantle UNRWA, many European nations have since reinstated funding after reviewing oversight measures and accounting for its critical humanitarian role. Fowler points to the recently commissioned and independent Colonna Report, which found UNRWA to have more robust neutrality standards than any other UN agency. Still, critics like Rovner, remain unconvinced, contending that the problem is systemic.

With increasing calls within Israel and the United States to abolish UNRWA, the question arises: If UNRWA disappears, what happens next?

Fowler says that the organization has no intention of existing indefinitely, but it continues so far as the situation remains unresolved.

“Abolishing UNRWA ignores reality,” observes Fowler. “We are often thanked by Israeli authorities, albeit at the moment not so openly, for the work we do, because without us, the responsibility will fall on them.”

The topic of reform has come up quite a lot where UNRWA and the UN at large are concerned. Some believe that redefining Palestinian refugees under UNHCR rules could force a shift in the political deadlock. Others, though, insist not only is it too little, too late for reforms, but that they are insufficient in addressing the deeper issues.

"As long as UNRWA exists, there will always be a Palestinian right-of-return narrative that keeps the conflict alive. Palestinians have to step up to the plate and take responsibility for their own future,” says Rovner.

With funding cuts, Israeli bans, and growing global pressure, UNRWA finds itself at a crossroads. Today, it is continuing to operate, even on a limited scale – holding that as long as millions remain classified as refugees, it has a job to do.

Still, fundamental questions continue to go unanswered: Who should be classified a Palestinian refugee? Should refugee status be hereditary forever – even for those who live in luxury? Who should be responsible for the Palestinians? And what is Israel’s role?

With neither Israel disappearing nor the Palestinian refugee issue nearing resolution, UNRWA persists as a central fault line in one of the world’s most protracted conflicts. Whether the agency serves as a crucial humanitarian lifeline or a political roadblock to lasting peace depends entirely on whom you ask.