USA officials said they were able to make the $230 million reduction because they had raised $300 million for recovery efforts in northeastern Syria from other countries, which were part of the coalition battling ISIS militants in the area.
"As a result of key partner contributions by coalition members, Secretary Pompeo has authorized the Department of State to redirect approximately $230 million in stabilization funds for Syria which have been under review", she said in a statement.
Still, the move was seen as a sign the administration is heeding Trump's demand to end US involvement in Syria and reduce its commitment there.
She further insisted that "this decision does not represent any lessening of U.S. commitment to our strategic goals in Syria". American military presence and support for anti-government fighters remains, and, according to diplomat Brett McGurk, is gearing up to a "final phase" of the offensive against Islamic State (IS, formerly ISIS/ISIL).
The stabilization projects focus on bringing back electricity and running water while removing land mines from the war-ravaged country. Jeffrey would also oversee talks on a political transition in Syria, including the future of Russia- and Iran-backed President Bashar al-Assad.
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McGurk said the funding was not targeted at reconstruction programs, adding that worldwide assistance to rebuild areas destroyed by war will not come until a United Nations-backed political peace process is achieved.
McGurk added the decision to cancel the $230 million funds would not diminish the US role as the top global player in northeast Syria. The Department of State spokeswoman thanked the generous support provided by the Saudi government, saying "we appreciate their fulfillment of this commitment".
The U.S. has been clear with Russian Federation that no reconstruction efforts will begin until the United Nations certifies that a credible irreversible political process is underway.
In June, the administration freed up a small portion - $6.6 million - of the $200 million that Tillerson had pledged in order to continue funding for the White Helmets, a Syrian civil defense organization, and the International, Impartial and Independent Mechanism, a United Nations agency that is investigating war crimes committed during the conflict.
Brett McGurk, the US special presidential envoy overseeing the fight against Islamic State in Syria and Iraq, said Saudi Arabia had contributed $100 million and United Arab Emirates had pledged $50 million toward the new funding. The U.S. says reconstruction assistance for Syria requires an global agreement involving the United Nations.