The American Israel Public Affairs Committee reemphasized its support for a two-state solution on Thursday as the Trump administration nears completion of a peace proposal that might stop short of recommending the establishment of a Palestinian state.
US Secretary of State Mike Pompeo said the consulate general, a separate office which handled dealings with the Palestinians, would be replaced by a new Palestinian Affairs Unit inside the controversial new US embassy in Jerusalem.
"Following the move of the U.S. embassy to Jerusalem, the closure of the PLO mission in Washington and the cut-off of humanitarian assistance to the Palestinian people, the closure of the East Jerusalem consulate hands another victory to the settlement movement and enemies of the two-state solution". Instead, Ambassador to Israel David Friedman will oversee US diplomatic ties with the Palestinians. He denied that it signaled any change in US policy toward Jerusalem or the Palestinian territories.
Relations between the sides have been tense since President Donald Trump made a decision to move the U.S. embassy from Tel Aviv to Jerusalem, recognising the city as Israel's capital despite its status being disputed by the global community and Palestinian claims that East Jerusalem should be the capital of their own state as part of a negotiated two-state solution.
The status of Jerusalem is one of the thorniest disputes between Israel and the Palestinians and Palestinian leaders accused Trump of sowing instability by overturning decades of USA policy.
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The Palestinian leadership condemned Washington's decision. The Palestinians, however, see the city as the capital of their future state.
Erekat, however, rejected the claim and said the move "has nothing to do with "efficiency" and a lot to do with pleasing an ideological USA team that is willing to disband the foundations of American foreign policy, and of the worldwide system, in order to reward Israeli violations and crimes".
The embassy was officially transferred on May 14, sparking violent protests in Gaza where about 60 Palestinian protestors were killed by Israeli fire.
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But Mr Erekat, the PLO's secretary general, said the United States could no longer play a part in the peace process, adding: "The Trump administration is part of the problem, not part of the solution".
"A great day for Israel, Jerusalem, and the United States".
In remarks to The New York Times, Daniel C. Kurtzer, an ex-envoy to Israel under Republican and Democratic administrations, said the Trump administration's decision regarding its mission for Palestinians in the occupied territories would certainly be counterproductive.
"As far I know this is unprecedented".
Since 1967, Israel has built a dozen settlements, home to about 200,000 Jews, in East Jerusalem.
"This step confirms that the USA recognises the entire city as Israel's capital", he said.
Pompeo's announcement came weeks after the U.S. shut down the Palestinian mission in Washington amid sour relations between the two sides.
The Palestinians accuse the Trump administration of siding with Israel and since the Jerusalem announcement have refused to meet with Jared Kushner and Jason Greenblatt, the White House's point men on Israeli-Palestinian issues.