What Happened

Without getting ahead of themselves, rivals India and Pakistan are testing the waters for a revival of talks. On May 23, Pakistani Prime Minister Imran Khan tweeted his congratulations to his Indian counterpart, Narendra Modi, on the latter's landslide victory in India's general election; Modi returned the favour, expressing his gratitude to Khan for the gesture. Three days later, the two leaders spoke by phone.

Also last week, Pakistani Foreign Minister Shah Mehmood Qureshi reshuffled officials in 18 diplomatic posts. As part of the changes, Qureshi shifted the country's ambassador to France, Moin-ul-Haque, to the vacant post of high commissioner to India — indicating Khan's desire to inject fresh energy into a position that is critical for dialogue with India. This week, Qureshi also exchanged pleasantries with Indian Foreign Minister Sushma Swaraj on the sidelines of the Shanghai Cooperation Organisation ministerial meeting in Bishkek, Kyrgyzstan.

The Big Picture

India and Pakistan's decades long dispute over Kashmir has the potential to trigger a war between the nuclear rivals. Following a February flare-up, the United Nations sanctioned Masood Azhar, a Pakistan-based militant who has been a bete noire for New Delhi for over two decades. Now, as Pakistan contends with a slowing economy, its need to offer a safe investment environment will run up against its enduring support for anti-Indian rebels in Kashmir. 

Diplomatic niceties notwithstanding, Pakistan's army did test the Shaheen II medium-range ballistic missile on May 22 — just a day before the announcement of India's election results. Without question, Pakistan's military conducted the test to communicate that India should not interpret Islamabad's overtures as a sign of weakness. And there was also a warning from the other side of the divide, as India's ambassador to the United States, Harsh Vardhan Shringla, said talks with Pakistan could not occur until the country ceased to use terrorism as an instrument of state policy.

Why It Matters

Khan's outreach comes in the wake of a crisis in bilateral relations. On Feb. 26, Indian warplanes entered Pakistani airspace to bomb what India claimed was a camp belonging to militant group Jaish-e-Mohammad (JeM), which had killed dozens of Indian soldiers in a convoy in Indian-administered Kashmir on Feb. 14. On Feb. 27, Pakistan retaliated by launching its own airstrikes across the Line of Control, the de facto boundary that divides Kashmir between the two countries, capturing an Indian pilot during an ensuing dogfight. Khan, however, prevented the standoff from escalating further when he ordered the pilot's release and repatriation on March 1.

More recently, the United Nations voted last month to impose a travel ban, asset freeze and arms embargo against the JeM's leader, Masood Azhar. The vote passed because China — Pakistan's major international ally — finally acceded to a decade of Indian demands for the international community to move against the senior militant. The U.N. vote represented a success for India's strategy to diplomatically isolate Pakistan by publicly censuring the country. Meanwhile, in an effort to seem like it's taking a more robust line on militancy, Pakistan acquiesced to the U.N. measure — as long as the international body decoupled Azhar from the wider Kashmir issue.

The latter provision is because Pakistan's army and intelligence services have supported anti-Indian rebels in Kashmir as part of a decades long campaign of asymmetric warfare aimed at achieving a balance against a larger adversary. However, the timing of JeM's attack on the Indian forces in Kashmir suggests that the army's senior leadership doesn't control all militant behaviour; the raid took place just two days before Saudi Crown Prince Mohammad bin Salman's visit to Islamabad, producing the kind of negative press Pakistan's civilian and military leaders would prefer to avoid. (As it is, the attack forced the crown prince to delay his visit by a day.) At the same time, Pakistan's army is aware of the danger of pushing Kashmiri rebels too hard, as it could spark a backlash and open yet another front in its war on militants, which includes battles with armed groups along the mountainous frontier with Afghanistan and separatist Balochi rebels who threaten one of the country's economic lifelines, the China-Pakistan Economic Corridor.

Pakistan's support for talks with India also comes against the backdrop of an economic slowdown. Growth in the $300 billion economy is expected to slow from 5.8 percent in the last fiscal year, which ended in June 2018, to 2.9 percent in the current fiscal year. And with Pakistan redoubling its efforts to attract foreign investment, Khan and powerful army chief Gen. Qamar Bajwa have even more reason to offer a safe destination for foreign investment. Indeed, Pakistan assented to sanctions against Azhar amid its continuing talks with the Financial Action Task Force, a global anti-money laundering watchdog, to demonstrate its desire to disrupt militant financing networks after the body gave Islamabad a rating that would threaten investments.

Islamabad will have to tread carefully as it seeks to maintain its proxy strategy while distancing itself from militancy to project a stable investment environment.

What To Watch Going Forward

Will state elections in Jammu and Kashmir shape Modi's outreach to Pakistan? State assembly elections in the contested Indian state are due by year's end. According to last week's general election results, Modi's Bharatiya Janata Party (BJP) improved its vote share in the state from 34 percent in 2014 to 46 percent. The figures indicate that the party's hard line on Pakistan is reaping electoral rewards and that Modi, whose posture on Pakistan is intimately linked to developments in Kashmir, might be wise to wait until after those elections to publicly engage in talks with Pakistani officials (though private, back-channel talks are always a possibility). More immediately, Modi has chosen not to invite Khan to his inauguration ceremony on May 30, unlike the leaders of Bangladesh, Thailand, Sri Lanka, Nepal, Bhutan, Myanmar, Mauritius and Kyrgyzstan.

Will Pakistan implement the sanctions against Azhar? Pakistan may have cut the militant leader loose, but it's highly unlikely that this single gesture heralds a strategic shift in Islamabad's strategy of cultivating militant proxies. It will be important to monitor Pakistan's implementation of the sanctions and whether Azhar retains freedom of movement. And because the sanctions against Azhar are occurring against the backdrop of economic problems and the Financial Action Task Force review, Islamabad will have to tread carefully as it seeks to maintain its proxy strategy while distancing itself from militancy to project a stable investment environment.

How will India respond in the event of future attacks in Kashmir? New Delhi and Islamabad's dispute over Kashmir could trigger a war in which Pakistan stages a tactical nuclear strike against India's superior conventional forces. The next time there's a major militant attack in Kashmir, India could — if the past is any guide — respond more forcefully in an effort to chip away at the deterrence capacity of Pakistan's tactical atomic weapons, albeit not to the degree that it would actually trigger a nuclear strike. Following a militant attack on India's Uri army base in 2016, New Delhi launched a ground-level "surgical strike" across the Line of Control into Pakistan. And in the wake of JeM's attack in February, India escalated its response by launching airstrikes in Balakot, a Pakistani town outside of disputed Kashmir, in an effort to demonstrate the vulnerabilities of Islamabad's air defence. If India delves further into Pakistan after a future attack, the ensuing tit-for-tat responses will only heighten the prospect of a bigger conflict between the neighbours.