Indian Prime Minister Narendra Modi on Thursday reacted strongly after police identified two attackers behind a deadly militant attack on tourists in Kashmir as Pakistani nationals, vowing to track, trace, and punish the terrorists and their supporters.

Speaking in the eastern Indian state of Bihar, Modi paid tribute to the 26 people shot dead in a meadow in the Pahalgam area of Indian Kashmir.

“We will pursue them to the ends of the earth,” Modi said, without naming the attackers’ nationality or Pakistan.

But tensions between the nuclear-armed rivals appeared set to escalate after India late on Wednesday ruptured ties with Pakistan, suspending a sixteen-year-old water treaty and closing the only land border crossing between the neighbors.

Pakistan’s Energy Minister Awais Lekhari called the suspension of the Indus Waters Treaty “an act of water war; a cowardly, illegal move.”

Pakistan also closed its airspace to Indian airlines and warned against violation of the water treaty.

Indian Kashmir police on Thursday issued posters naming three militants suspected of “involvement” in the attack and announcing rewards for information leading to their capture.

The posters stated that two of the three suspected militants were Pakistani nationals.

India and Pakistan control separate parts of Kashmir and both claim the territory in full.

Indian Foreign Secretary Vikram Misri said on Wednesday that a cabinet committee on security had been briefed on the cross-border links of the attack, the worst against civilians in the country in nearly two decades.

Misri, the top diplomat in India’s foreign ministry, did not offer any evidence of the links or provide further details.

Misri said New Delhi would withdraw its defense advisers in Pakistan and reduce the number of personnel at its mission in Islamabad from 55 to 30.

Local media reports said India summoned Pakistan’s top diplomat in New Delhi to inform him that all defense advisers at the Pakistani mission had been declared persona non grata and given a week to leave.

Modi also called an all-party meeting to brief them on the government’s response to the attack.

Dozens of protesters gathered outside the Pakistani Embassy in New Delhi’s diplomatic enclave on Thursday, chanting slogans and pushing against police barricades.

Foreign Minister Ishaq Dar said in Islamabad that Prime Minister Shahbaz Sharif would hold a National Security Committee meeting to discuss Pakistan’s response.

The Indus Treaty, brokered by the World Bank and signed in 1960, regulated the sharing of waters from the Indus River and its tributaries between India and Pakistan. The treaty has since survived two wars between the neighbors and serious tensions in relations at other times.

Diplomatic relations between the two countries were weak even before the latest measures were announced, after Pakistan expelled India’s envoy and India did not send its high commissioner to New Delhi after it revoked Kashmir’s semi-autonomous status in 2019.

Tuesday’s attack is seen as a setback for what Modi and his Hindu nationalist Bharatiya Janata Party have projected as a major success in removing the special status held by the state of Jammu and Kashmir and bringing peace and development to the long-troubled Muslim-majority region.

While India frequently accuses Pakistan of involvement in the insurgency in Kashmir, Islamabad maintains it only provides diplomatic and moral support.

Tens of thousands of people have been killed in Kashmir since the insurgency began in 1989, but the insurgency has waned in recent years and tourism has increased in the naturally beautiful region.

According to a report from the Reuters news agency, based on four sources familiar with payment processes, sanctioned Russian banks and companies are actively using netting systems to carry out export and import payments in trade with China.

These systems have significantly reduced costs for Russian businesses while also accelerating cash flow.

Sources stated that in early 2024, payment agent commissions reached up to 12% of the invoice amount, but currently, the average agent commission has dropped to 2% to 3%.

This decrease became possible after large Russian banks and exporters established closed netting systems to simplify financial logistics with China.

Financial logistics had suffered two heavy blows: the mass exclusion of Russian banks from SWIFT in 2022 and the near halt of direct payments with Russia by major Chinese banks in 2024 under the threat of secondary sanctions.

A source from the payment market said, “At that time, everyone faced the need to structure financial flows through friendly countries to protect these payments from blockages, but people have now learned to work with this, different payment solutions are developing.”

The same source and others said that the cheapest way to make payments with China is currently through mutual offsetting via “netting.”

The same source added, “In addition to payment agent services as sub-suppliers, mutual offsetting, sessions… We even do swap transactions so that money does not cross the border. Many companies, especially large importers, are investing in developing their own foreign structure networks and not depending on third parties.”

Elvira Nabiullina, Governor of the Bank of Russia, stated in a recent speech in parliament that Western sanctions have made cross-border payments difficult for Russian companies, but alternative payment channels are emerging.

Another source from banking circles said, “The most effective tool is goods netting. Essentially, this is a solution that involves property exchange and the use of payment agents who serve the counter-flows of exporters and importers within their own circles and service banks, offsetting these flows.”

The source said that this service was established by large Russian banks within their own circles and that thanks to their participation, this system has not yet seen significant defaults.

They noted that large companies are interested in having a bank as a guarantor for payments and that banks offer tools that protect them from the risk of payment agent default.

Bankers explaining the payment system with China through payment agents said that payments go directly to any Chinese bank without delay, provided the goods are not sanctioned and the counterparty is registered in one of China’s 11 provinces (Anhui, Heilongjiang, Shandong, Zhejiang, Guangdong, Xinjiang, Jilin, Shaanxi, Sichuan, Fujian, and Hebei).

The 11-province scheme, also called the “China path,” is primarily aimed at large companies, and its disadvantage is the requirement for each payment to be confirmed.

Furthermore, according to the source, the supplier does not always accept this scheme, as they generally cannot reclaim export VAT.

Another banker described the advantages of the service: “The scheme allows direct work with 11 Chinese provinces that are fundamental for the production of goods exported to Russia. The cost is calculated according to the Central Bank rate, there is no spread on it.”

The cost of agent services starts from 1% of the invoice amount for imports and 0.5% for export transactions.

Banks stated that they assist with VAT refunds through this scheme by consulting with Chinese counterparties.

A banker said, “According to statistics, we currently have 100% money transfer success, meaning there hasn’t been a single return. Money is delivered within two days. Currently, there is one clearing session per week, on Thursdays.”

They added that they plan to start two clearing sessions from the end of April, on Tuesdays and Thursdays.

Zhang Hanhui, China’s Ambassador to Moscow, confirmed that clearing allows for the regulation of mutual payments between the two countries.

Zhang told reporters, “We can turn international mutual offsetting into domestic offsetting. Then we compare the accounts, and that’s it; the balance.”

The diplomat said, “There is a need for a new channel instead of SWIFT between our banks. This issue is currently being discussed.”

Osman Kabaloyev, Deputy Director of the Financial Policy Department at the Russian Ministry of Finance, stated that the authorities support the creation of alternative payment mechanisms to create a full “payment menu” consisting of different options for businesses and banks.

A source from banking circles said, “Thanks to the wide range of solutions, the prices for alternative payments in the banking system have recently decreased… Every large exporter or importer, competing with banks, tries to get involved in payments using the capabilities of their related companies outside Russia.”

The source added that the average range of delivery tariffs, including currency commissions, for large corporate clients is 2% to 3% of the payment amount, which applies to both fiat and crypto payments, and noted that tariffs for small and medium-sized businesses do not exceed 4%.

The source said that the price conditions on the “China path” are the most favorable, but there are restrictions regarding provinces and goods names, and clearing sessions are infrequent.

Global trade wars have reinforced the assumption among Russian businesses that China will now approach US threats more easily.

Aleksandr Shokhin, President of the Russian Union of Industrialists and Entrepreneurs (RSPP), said, “There is a high probability of active penetration of Chinese imports into the Russian market. It is not excluded that the Chinese will stop being afraid of secondary sanctions.”

China’s Ambassador said, “Russia-China relations are only changing for the better, from victory to victory… We will overcome American sanctions sooner or later.”

As Donald Trump’s tariffs rattled markets earlier this month, Japanese investors offloaded more than $20 billion in international bonds, a sign of how Wall Street turbulence is spreading globally.

According to preliminary data from Japan’s Ministry of Finance, private institutions, including banks and pension funds, sold $17.5 billion in long-term foreign bonds in the week to April 4, and another $3.6 billion in the following seven days.

Japan holds $1.1 trillion in US Treasury bonds across the public and private sectors – the world’s largest international holdings – so its transactions are closely watched and considered a proxy for buying or selling US government debt.

The recent sales mark one of the largest outflows in any two-week period since records began in 2005.

The outflow from international bonds followed Trump’s “liberation day” tariff announcement on April 2, which triggered turbulence in global stock and bond markets.

Wall Street’s S&P 500 index fell 12% in the four trading days after April 2, before recovering somewhat after Trump suspended most of his high “reciprocal” tariffs for 90 days.

US Treasury bonds also experienced a significant sell-off during the market volatility, with yields on 10-year bonds rising to their highest level since 2001 in the week of April 11.

The Ministry of Finance report does not provide details on which specific long-term bonds were bought and sold by the country’s financial institutions.

However, Tomoaki Shishido, a senior interest rate strategist at Japanese bank Nomura, said that “a significant portion of [Japan’s] sales were likely either US Treasury bonds or US agency bonds.” The latter refers to mortgage-backed securities guaranteed by the US government.

He added, “Some foreign bond sales may be due to rebalancing by Japanese pension funds… or banks or life insurers reducing interest rate risks.”

Sales by US asset managers and the unwinding of leveraged positions by US and international hedge funds may also have contributed to the sell-off in Treasury bonds this month.

However, Japan’s rush to sell international bonds is a sign of how Wall Street turbulence is spreading to global markets.

According to some investors, the decline in US stocks would have unbalanced Japanese pension funds’ allocations to international debt and equities.

As a result, they said, the funds would be under pressure to sell Treasury bonds and other US government-backed debt to realign their portfolios.

According to analysts, some of the sales by private Japanese investors may also be a result of the unwinding of hedging strategies used by Japanese banks.

In these transactions, known as “carry trades,” investors borrow from low-yield markets to bet on higher-yield markets. Due to its relatively low yields, Japan is a common “funding” market for these transactions.

However, Stefan Angrick, a Moody’s Analytics economist in Japan, said that while the volume of Treasury bonds sold by Japanese funds was significant, it would not be large enough to fully explain the yield increases in the first two weeks of April.

Noting that the US Treasury market turns over nearly $1 trillion on an average day, Angrick said, “Headline figures may look large, but in terms of the bond market, they are just a ripple.”