The United States on Monday halted funding of UNESCO, the U.N. cultural agency, following its vote to grant the Palestinians full membership.
U.S. State Department spokeswoman Victoria Nuland told reporters, Washington would not make a planned $60 million transfer that was due in November.
The United States provides 22 percent of the funding of the United Nations Economic, Scientific and Cultural Organization.
That agency decided on Monday to give the Palestinians full membership, a vote that will boost their bid at the United Nations for recognition as a state.
UNESCO is the first U.N. agency the Palestinians have joined as a full member since President Mahmoud Abbas applied for full membership of the United Nations on Sept. 23. Among UNESCO's tasks are designating World Heritage sites, promoting education around the world, and managing a tsunami early-warning system in the Pacific.
Palestinian officials have said they intend to apply for full membership of as many U.N. agencies as possible. This clearly worries State Department officials who fear a loss of U.S. influence if it imposes more funding cutoffs.
"US law aims to halt Palestine right to state"
The 1990s law prohibits U.S. funding to any U.N. organization that grants full membership to any group that does not have "internationally recognized attributes" of statehood.
The language was intended to pre-emptively block normalization of Palestinian relations and activities in the international community, said Lara Friedman, policy director at Americans for Peace Now, an American-Jewish pro-peace group.
The law could also prohibit American funding for any other U.N. organization that grants Palestinians full membership status, such as the International Atomic Energy Agency.
Esther Brimmer, the assistant secretary of state for international organizations, met representatives of major U.S. companies on Monday as part of pressure to halt a potential Palestinian bid to join the World Intellectual Property Organization (WIPO).
Geneva-based WIPO is the U.N. organization charged with protecting copyright, covering everything from song credits to patents for new drugs and high-tech innovations.
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