Pakistan closes air space for Indian airlines, warns against water treaty violation as ties plummet

By Asif Shahzad, Ariba Shahid and Fayaz Bukhari

ISLAMABAD/SRINAGAR, India (Reuters) -Pakistan closed its air space for Indian airlines and rejected New Delhi's suspension of a critical water sharing treaty on Thursday in retaliation for India's response to a deadly Islamist militant attack on tourists in Indian Kashmir.

The tit-for-tat announcements took relations between the nuclear-armed neighbours, who have fought three wars, to the lowest level in years.

The latest diplomatic crisis was triggered by the killing of 26 men at a popular tourist destination in Indian Kashmir on Tuesday, in the worst attack on civilians in India since the 2008 Mumbai shootings.

New Delhi said there were cross-border elements to the attack and downgraded ties with Pakistan on Wednesday, suspending a 1960 treaty on sharing waters of the Indus River and closing the only land crossing between the neighbours.

Indian police published notices naming three suspects and saying two were Pakistanis, but New Delhi has not offered any proof of the links, or shared any more details.

On Thursday, Pakistan said it was closing its air space to Indian-owned or operated airlines, suspending all trade including through third countries and halting special South Asian visas issued to Indian nationals.

Islamabad will also exercise the right to hold all bilateral accords with India, including the 1972 Simla Agreement, in abeyance until New Delhi desists from "fomenting terrorism inside Pakistan", Pakistan's Prime Minister's office said in a statement.

The Simla Agreement was signed after the third war between the two countries and lays down principles meant to govern bilateral relations, including respect for a ceasefire line in Kashmir.

There was no immediate response from New Delhi to Pakistan's announcement.

Pakistan's dollar-denominated government bonds dropped more than 4 cents on Thursday as the tensions escalated.

Muslim-majority Kashmir has been at the heart of the animosity between India and Pakistan, with both claiming it in full and ruling it in part. It has been the cause of two of their three wars and also witnessed a bloody insurgency against Indian rule.    

Islamabad also said it "vehemently rejects" India's suspension of the Indus Waters Treaty and said that any attempt to stop or divert water belonging to Pakistan would be considered an "act of war and responded with full force across the complete spectrum of national power".

The water treaty, mediated by the World Bank, split the Indus River and its tributaries between the neighbours and regulated the sharing of water. It had so far withstood even wars between the neighbours.

Pakistan is heavily dependent on water flowing downstream from this river system from India for its hydropower and irrigation needs. Suspending the treaty would allow India to deny Pakistan its share of the waters.    

MODI PLEDGES TO PUNISH ATTACKERS

Pakistan's response came hours after Indian Prime Minister Narendra Modi vowed to pursue, track and punish the militants who separated the men among the tourists in Kashmir's Pahalgam area and shot them dead.

It also came after the Indian foreign ministry announced the suspension of all visa services to Pakistanis and revoked visas that have already been issued.

Ahead of his public speech at an event in the eastern state of Bihar, Modi folded his hands in prayer in remembrance of the men killed in Kashmir, exhorting thousands gathered at the venue to do the same.

"We will pursue them to the ends of the earth," Modi said, without referring to the attackers' identities or naming Pakistan.

"They have made the mistake of attacking the soul of India. I want to say clearly, that those who have planned and carried out this attack will be punished beyond their imagination," Modi said to cheers from the crowd.

Modi has called an all-party meeting with opposition parties later on Thursday to brief them on the government's response to the attack.

In New Delhi, dozens of protesters gathered outside the Pakistani embassy in the diplomatic enclave, shouting slogans and pushing against police barricades.

A film that starred Pakistani actor Fawad Khan in the lead with Bollywood actor Vaani Kapoor will now not be released in India, local media reported, citing federal information ministry sources.

Diplomatic relations between the two countries were weak even before the latest measures were announced as Pakistan had expelled India's envoy and not posted its own ambassador in New Delhi after India revoked the semi-autonomous status of Kashmir in 2019.

Tuesday's attack is seen as a setback to what Modi and his Hindu nationalist Bharatiya Janata Party have projected as a major achievement in revoking the special status Jammu and Kashmir state enjoyed and bringing peace and development to the long-troubled Muslim-majority region.

India has often accused Islamic Pakistan of involvement in the insurgency in Kashmir, but Islamabad says it only offers diplomatic and moral support to a demand for self-determination.

Tens of thousands of people have been killed in Kashmir since the uprising began in 1989, but it has tapered off in recent years and tourism has surged in the region.    

(Reporting by Asif Shahzad and Ariba Shahid in Islamabad, Fayaz Bukhari and Shivam Patel in Srinagar; Writing by Shilpa Jamkhandikar and YP Rajesh; Editing by Kevin Liffey and Sharon Singleton)