India’s 2025 suspension of the Indus Waters Treaty was a textbook assertion of upstream dominance. One year later, New Delhi is reportedly exploring a tactical retreat—not out of goodwill, but because the costs of confrontation have begun to outweigh the benefits.
Such a rethink, if confirmed, would result from an uncomfortable mix of regional imperatives including a colossal Chinese dam on the Yarlung Tsangpo River that has, for the first time, reduced India to a lower-riparian state.
The Airspace Price Tag
On the face of it, a retreat defies Modi’s political brand, which thrives on projecting strident toughness toward Pakistan over militancy. Yet Islamabad’s diplomatic stock has risen sharply—mediating between the U.S. and Iran—while its closure of Indian commercial overflights has inflicted real financial pain.
Since April 2025, Pakistan has barred Indian flights from its airspace, a retaliatory move for India’s treaty suspension, which New Delhi said was a move in reaction Pakistani militants’ involvement in Pahalgam terrotist attack. Industry estimates cited by Aviation A2Z put the 2026 cost to Indian carriers at over $1 billion—a hemorrhage driven by detours, extra fuel, and canceled flights for Air India and IndiGo. Speculation has since swelled that New Delhi may offer to restore the treaty in exchange for reopening the skies.
Due to the closure of Pakistani airspace, Air India is in troubled waters. To rescue Air India from its losses, the Indian government has decided to hurt IndiGo Airlines by stopping its low-cost flight operations and allowing a steep increase in domestic flight fares so that Air… pic.twitter.com/hApa0ZDxvN
— The Whistle Blower (@InsiderWB) December 13, 2025
Pakistani analyst Najam Sethi, commenting on recent unofficial back channel contacts between the two sides, dismisses such talk as mere “kite-flying,” arguing India wants a tactical de-escalation, not a genuine reconciliation.
But Michael Kugelman of the Atlantic Council sees deeper pragmatism.
Writing in Time magazine, Kugelman observes that both nations are navigating a world of considerable turbulence. “With so many fires raging,” he writes, “neither India nor Pakistan can afford to ignite another.” He points to recent Track II meetings in Sri Lanka and Thailand as evidence of an unofficial desire to cap tensions, noting that “these gestures signal a willingness to be pragmatic and to recognize the considerable costs of fresh escalations.”
That this unofficial communication channel has resumed is striking. Official dialogue remains frozen since the April 2025 Pahalgam attack, yet the resumption of back-channel exchanges—focusing on crisis management and water-sharing—suggests both sides recognize the steep costs of continued hostility.
𝐂𝐡𝐢𝐧𝐚’𝐬 𝐃𝐞𝐥𝐮𝐬𝐢𝐨𝐧𝐚𝐥 𝐌𝐞𝐬𝐬𝐚𝐠𝐞
India maintains that its approach to the Indus Waters Treaty is driven by national security concerns and the need to respond firmly to cross-border terrorism. Yet Victor Gao invokes the principle of “don’t do unto others what you… pic.twitter.com/87VT0TBQi1
— The GEOSTRATA (@TheGeostrata) July 1, 2026
The Unspoken Nuclear Overhang
Beneath these calculations lies a reality neither side acknowledges openly but both plan for obsessively: the nuclear shadow. India and Pakistan together field an estimated 300–400 warheads, with delivery systems ranging from short-range ballistic missiles to submarine-launched platforms. Each conventional skirmish carries the latent risk of vertical escalation.
This is precisely why Track II diplomacy matters. When foreign ministries refuse to speak, retired generals and ex-diplomats become de facto crisis communicators. The Colombo and Bangkok meetings were not about friendship; they were about installing guardrails against miscalculation—a misinterpreted radar blip, a sudden water flow reduction, or a militant attack falsely attributed—any of which could trigger conventional war with nuclear implications. For India the risk of a two-front war with Pakistan and China is also a nightmarish scenario.
Trump says US intervention prevented Pakistan-India nuclear war
This may be the unspoken reason why New Delhi’s recalibration is not merely about economics. It is about risk management in a neighborhood where warheads outnumber water-sharing agreements. The fears of the two neighbors going nuclear during the 2025 conflict, as expressed by U.S. President Donald Trump, do not appear out of the blue.
Economics Is Only Half the Story
Yet even the nuclear shadow does not fully explain New Delhi’s strategic unease. A far more consequential calculation—one that strikes at the very logic of India’s upstream advantage—could now be forcing a broader rethink: China’s new hydropower megaproject on the Yarlung Tsangpo in Tibet.
With generating capacity set to surpass the Three Gorges Dam, Beijing’s $168 billion project has awakened New Delhi to a raw reality—one strikingly similar to what Pakistan has long articulated.
🇨🇳⚡ China Is Building the World’s Most Powerful Hydropower System and It Changes Everything
China has begun construction of what is set to become the largest and most powerful hydropower system on Earth, deep in the Himalayas on the Yarlung Tsangpo River in Tibet, the river… pic.twitter.com/4XGkO9g5NG
— James Wood 武杰士 (@commiepommie) December 17, 2025
For the first time, India finds itself a lower-riparian state, dependent on flows from beyond its borders—the very predicament for which it has long condemned Pakistan. This raises an uneasy question: Will India now demand from Beijing the transparency, data-sharing, and adherence to principles it has consistently denies Islamabad?
The parallels end there
Unlike India, Pakistan wields tangible leverage—its airspace—a card New Delhi cannot play against China. In addition to embarrassing India during the 2025 conflict with its airpower, Islamabad has been systematically pressing its case at international forums, winning The Hague-based Court of Arbitration’s verdict in its favor, accusing India of “water terrorism” while imposing a heavy geostrategic cost on its eastern neighbor. Should Pakistani airspace remain closed, India would be forced into a forever detour to reach Iran, Afghanistan, and Europe—undermining not just aviation, but broader trade ambitions.
Even Russian President Vladimir Putin, an ally of Modi, has advised New Delhi to reconcile to the fact that Pakistan occupies a strategic importance on the world stage with its size and close ties to important world powers.
A Strategic Wake-Up Call
Compounding New Delhi’s predicament is the shifting West Asian landscape. As the U.S.-Iran conflict winds down—due in part to Pakistan’s skilled diplomacy—Islamabad is poised to earn fresh advantages. With Washington easing Iranian sanctions, Pakistan can finally move forward with the long-dormant Iran-Pakistan (IP) gas pipeline. More than a decade ago, several pipeline projects were envisioned to carry gas from Central Asia and Iran to the subcontinent. Their revival now looks increasingly viable.
The Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline—long stalled by security and political hurdles—could also see renewed momentum, if things go well regionally. A gas pipeline project, guaranteed with U.S. approval following a final peace deal, could unlock an inexpensive and reliable long-term energy source for Pakistan.
Energy-hungry India would not be far behind in benefiting from such projects, provided it can navigate the diplomatic and transit complexities. If Pakistan and India can sort out their Kashmir tensions, even the China-Pakistan Economic Corridor—which New Delhi currently opposes—could become a mutual geoeconomic opportunity through diversification of energy supplies.
‘If US and Iran Can Talk, So Can India and Pakistan’: Mirwaiz”
Oh look! We are back to the 90’s https://t.co/cVSGbrrVXE— Smita Prakash (@smitaprakash) June 30, 2026
Mohammad Nasimuddin Mirza, a Pakistani-American entrepreneur with long experience in energy supplies in the Middle East, says it’s time India and Pakistan fix the unrealistic trade policies.
“For far too long, India and Pakistan have shunned doing trade with each other. In the past, it could be argued that they sought access to Western markets.
“But now, I think, the events in the Gulf and much-larger economies make a strong case for their bilateral trade,” he told Views News Now.
“It makes great sense for India to have a reliable source of energy in the form of Iran Pakistan gas pipeline. That would lower the energy prices, reduce production cost and improve competitiveness. Both countries will gain enormously from the interdependence and stable energy supplies.”
A Slippery Geostrategic Slope
The calculus that once seemed a black and white proposition—India as upstream controller, Pakistan as downstream dependent—has now inverted vis-à-vis China. Indian policymakers are forced to reconcile their historical stance with an evolving regional reality where water, diplomacy, sustained economic growth, regional connectivity including the China Pakistan Economic Corridor, nuclear dangers, and energy security are not divergent factors, but they are delicately entangled.
Old certainties are vanishing. From Tibet and the Himalayas to the Hormuz Strait, new risks are emerging faster than New Delhi’s and Islamabad’s institutional capacity to address them. The question is no longer whether India and Pakistan should engage, but whether they can adapt before the new regional architecture leaves them both behind.
Ali Imran is a Washington-based journalist, who has worked for leading world news organizations as correspondent, expert and in editorial positions. He is a published author and poet.
