Aid on Hold: The Impact of the U.S. Foreign Assistance Freeze

The United States Agency for International Development (USAID) has long been a strategic tool for advancing U.S. foreign policy across the globe through humanitarian assistance, economic development, and the promotion of democratic governance. It assisted about 130 countries, which, according to the US government, were either strategically important or were in conflict and needed external support to avoid humanitarian crises. 

However, recent developments and changes in attitude to the deployment of foreign aid have raised concerns about the future of U.S. global influence. This shift has sparked debate about how aid-dependent nations will cope without crucial U.S. support, and how these decisions might reshape international alliances and geopolitical dynamics. 

Background 

USAID, as an independent government agency, has operated for 63 years under the direct authority and policy guidance of the Secretary of State. It was established during the Cold War when tensions between the US and the USSR were exceptionally tightened. It was a part of President John F. Kennedy’s elaborate effort to counter Soviet influence in developing nations that, under poor economic and social circumstances, could have bent towards communism. Before its establishment, several foreign aid agencies already existed.  In 1961, by the Foreign Assistance Act, these agencies were united under one institution named the United States Agency for international Development.

Under the motto "From the American People," USAID  became responsible for administering all international aid. It started operating in regions affected by poverty, conflict, and natural disasters. Over the decades, its programs have ranged from long-term development projects to rapid crisis response. Foreign aid has long served as a pillar of U.S. diplomacy, complementing military and economic tools to project influence and build partnerships. 

Over the decades, changes in political priorities and global geopolitical shifts have influenced the size, allocation, and usage of foreign aid. Accordingly, at the peak of the Cold War, the share of foreign aid comprised a significant sum in total federal spending. In 1963, the share of foreign aid in the total federal spending was roughly 4.7%․ This figure has been steadily declining, reaching 0.6% of total federal spending in 1989.

Since 2001, the share of foreign aid has ranged from 0.7% to 1.4% of total federal spending over the years. According to available data, the United States spent $68 billion on international aid in 2023. More than half of that amount was the USAID budget itself, which is about 0.6% of the US's total annual government spending of $6.75 trillion. Foreign aid spending between 2008 and 2023 ranged from $52.9 billion to $77.3 billion.

Many policymakers also see aid as a strategic tool for crisis prevention and mitigation. Investing in health systems or food security, for example, was believed to reduce the likelihood of future conflict or mass migration. Though often presented as a cost-effective tool, it is worth mentioning that over the decades, many have cast doubt on its success. According to the Kiel Institute for the World Economy, “development aid is largely ineffective in reducing irregular migration” and that “only an unrealistically vast increase in aid would prevent the majority of irregular migration”. Before the complete freeze on foreign aid, there were times when the United States decided to temporarily suspend or redirect foreign aid as a form of political pressure or in response to newly emerging political realities.

"America First" and the Future of Foreign Aid

Donald Trump has long been a critic of foreign aid, arguing that it is not a good use of American taxpayers’ money and that it funds governments that do not reciprocate with loyalty or strategic cooperation. As early as 2017, there was an initiative to cut the budget of the State Department and USAID by 31%. Although Congress rejected this proposal, Trump nevertheless managed to stop or freeze aid to several countries.

During his 2024 re-election campaign, Trump intensified his rhetoric, promising to reduce wasteful foreign aid and reinvest those funds in solving domestic problems. Upon returning to the office, Trump moved to implement his campaign promises. Questioning the agency’s cost-effectiveness, he signed Executive Order N14169 suspending foreign aid for 90 days to conduct a comprehensive review of its programs. Shortly thereafter, it was announced that it would be merged with the State Department, with significant staff reductions.

The legality of this decision was immediately challenged, given that the agency’s mandate under the Foreign Assistance Act belongs to Congress. Despite the legal proceedings initiated, the decision remains in effect.

According to Trump, USAID was run by “radical lunatics,” and Elon Musk, head of the US Department of Government Efficiency (DOGE), labeled the organization “criminal.” According to the official White House statement, USAID has wasted taxpayer money for decades on “ridiculous — and, in many cases, malicious” programs, such as promoting diversity, equality, and inclusion, LGBTQ+ initiatives, arts funding, environmental efforts, and more.

However, it is important to note that the current administration does not underestimate the significant impact that foreign aid can have. In this regard, Secretary of State Marco Rubio writes: “Foreign assistance done right can advance our national interests, protect our borders, and strengthen our partnerships with key allies.”

Critics argue that such cuts could weaken US diplomatic engagement in the world, creating strategic opportunities for rival powers such as China to expand their international influence. According to political scientist Thomas Pepinski, the decision to close the USAID is “fundamentally incompatible with the United States’ national interest. Throughout the world, USAID has been a strong supporter of U.S. diplomacy.”

USAID Activities in Armenia

Discussing the USAID activities in Armenia, it is important to note that foreign assistance has consistently played a significant role in Armenia-US relations. Since 1992, USAID has actively supported Armenia’s democratic development by investing in democratic governance, economic growth, healthcare, education, electoral reform, judicial and local self-government reforms, and the establishment of civil society organizations.

To address economic challenges in rural areas and promote balanced regional development, USAID has implemented key programs such as the “Partnership for Rural Prosperity” (PRP) and the “Armenian Rural Development Initiatives” (ARDI) in more than 150 communities across Armenia. Additionally, under the “Clean Energy and Water” (CEWP) program, $5.6 million was invested to enhance the country’s energy and water security.

In partnership with Microsoft RA, USAID has established the Microsoft Innovation Center (MIC) to foster technology and innovation in Armenia. The center’s goal is to foster foreign investment and encourage new players to enter the local market, contributing to private sector growth.

Over the past two decades, USAID has played a key role in supporting Armenia’s democratic development through initiatives focused on electoral reform, police modernization, and anti-corruption efforts.

In 2018, USAID signed a four-year, $8.6 million contract with Armenia to improve the integrity of the electoral process. The goal of this initiative was to strengthen the capacity of the Central Electoral Commission of Armenia, promote voter education, and support the organization of transparent elections. In addition, USAID has partnered with the International Foundation for Electoral Systems (IFES) to promote electoral processes and political accountability in Armenia.

USAID, in partnership with the U.S. Department of Justice's International Criminal Investigative Training Assistance Program (ICITAP), has supported comprehensive police 

reforms in Armenia, implemented measures to modernize police methodologies, increase accountability, and professionalism, and supported the establishment of the Patrol Service.

USAID also implemented the Armenia Integrity Project (AIP) to combat corruption and promote good governance. This program provides targeted assistance to the Commission for the Prevention of Corruption and the Ministry of Justice to support the development of a comprehensive anti-corruption strategy and to build staff capacity.

The agency has also made significant investments in the development of the media sector in Armenia, to raise journalistic standards, promote the financial sustainability of public interest media, and combat disinformation.

In response to the humanitarian crisis of Armenians displaced from Nagorno-Karabakh in September 2023, USAID provided significant support to those who have found refuge in Armenia. In particular, an additional $1 million was provided in February 2024. These funds have supported approximately 19,300 displaced persons sheltering in Ararat, Kotayk, Lori, Shirak, Syunik, Tavush regions, and Yerevan. The assistance has included the provision of food, hygiene items, and psychological support to alleviate the trauma of displacement. In addition, in April 2024, USAID announced approximately $8.5 million to address the housing needs and provide psychosocial support to displaced persons.

In the end

Countries that depend on aid, especially in areas such as health, education, and infrastructure, are already facing major challenges that could escalate into catastrophic realities if alternative support mechanisms are not found.

The future of U.S. foreign aid now hinges largely on domestic political dynamics. A partial or full restoration of aid remains possible—particularly if it aligns with broader strategic interests or if a court ruling mandates its reinstatement, though the latter remains unlikely. Restoration may also depend, in part, on the future policies of aid recipient countries—specifically, what they can offer the U.S. in return. This shift underscores a broader transformation in U.S. foreign aid strategy: from a primarily soft power tool to a more transactional and security-driven approach.

The policy of reducing foreign aid was certainly not unexpected, but the extent to which it was implemented was surprising. Trump has made it a priority to ensure that any foreign spending is consistent with the “America First” principle. According to the administration, many foreign aid programs have not been at all in line with American interests and values, and have instead advanced a left-wing, extremist agenda. Further provision of foreign aid will be exclusively with deep and multi-layered strategic recalculations and strict budgetary control.

In line with Washington’s evolving priorities, alternative forms of bilateral engagement should be sought to ensure sustainable cooperation. The Strategic Partnership Charter between the Republic of Armenia and the United States, signed in January 2025 with the previous U.S. administration, nonetheless presents an opportunity to establish a framework for a new phase of bilateral relations, focusing on cooperation in key areas such as defense, energy, and economic development.

Trump’s foreign policy is rooted in a logic of “deal-making” and economic reciprocity. In light of this new reality, Armenia must reassess its strategic approach, moving beyond traditional models of cooperation and focusing on the development of mutually beneficial proposals. This shift should not be seen as a limitation, but rather as an opportunity to craft a compelling and practical agenda that positions Armenia as a reliable partner, regionally and globally.

To this end, Armenia should prioritize sectors where U.S. investment not only supports local development but also aligns with American economic and strategic interests. One such area is Armenia’s fast-growing technology and IT sector. In addition, Armenia offers several key advantages for broader economic cooperation. With a highly educated, technologically proficient workforce and a strategic location bridging Europe and Asia, Armenia is well-positioned as a trade and logistics hub, especially for American firms aiming to expand into the Caucasus, Central Asia, and the Middle East. The country’s rich mineral resources, including copper, molybdenum, and gold, also present opportunities․

These areas of cooperation could serve as the foundation for a long-term, mutually beneficial partnership between Armenia and the United States, especially as Armenia continues to pivot toward closer ties with the West.

Mariam Khurshudyan (Orbeli Center)