Confirming most people’s suspicions, U.S. intelligence agencies have concluded that the ISI was involved in planning the deadly July 7 bombing in Kabul. If this actually pans out, then it is an escalation to a point not before seen—the CIA actually publicly condemning the ISI for its involvement with militants, specifically Jalaluddin Haqqani, a major Taliban commander and the alleged coordinator of the bombing.
As for India, this is dire news, but also confirmation of what they knew all along: their Cold War is being fought in Afghanistan. Pakistan has never been comfortable with India’s aggressive diplomatic push into the country, with four consulates and the embassy giving them a substantive presence. Pakistan has always considered Afghanistan its own to meddle with, and became accustomed to doing as it pleased in the 1980s.
Secondary issue: is the fighting in Kashmir a distraction? Recently, it’s seemed that hostilities there have escalated when unwanted attention is lavished upon the ISI’s activities in the tribal areas: 2002 during the Great Taliban Exodus, 1999 just after the Clinton missile strikes in Khost, and now, right when the ISI is facing blame for the embassy bombings. This is hardly a trend, but there is a worrying correlation in play; might Pakistan (the ISI more specifically) be using Kashmir to deflect attention from its activities in Afghanistan?
Update: As usual, Péter Marton does a bang up job on this topic as well. His post is required reading.