Rafiq Bahai has seen better days. His Pakistani-based group of jihadis, the Al Badr Mujahedin, once led fierce raids on Indian troops in the disputed territory of Kashmir. But last year this regional commander's wings were clipped. President Pervez Musharraf ordered Bahai's recruiting offices shut down, his phone lines cut and his bank account frozen. His Pakistani military handlers have forbidden him from raising funds or recruiting openly. Knowing he is under surveillance, Bahai recently met clandestinely with a NEWSWEEK reporter in a real-estate office in a northern Pakistani town. He boasts that he still has hundreds of fighters operating inside Indian-controlled Kashmir but admits that most of his men, who are largely ethnic Pashtuns from Pakistan, have returned home to their farms and villages since Musharraf's crackdown. "Naturally our mujahedin are frustrated," says the 33-year-old Bahai, who asked that his real name not be used. "But our spirits are high and we still enjoy popular support. Any attempt by Musharraf, India or the United States to stop our jihad will be unsuccessful."

Until last year most militants like Bahai had a cozy relationship with Pakistan's military-intelligence agency, Inter-Services Intelligence, or ISI. Since the late 1980s the ISI had helped train, arm and infiltrate jihadi fighters into Indian-controlled Kashmir. No longer. To deepen the rapprochement he struck with India during talks with the then Indian Prime Minister Atal Behari Vajpayee last January, Musharraf dropped the military's longtime policy of directly supporting the Kashmiri jihad and promised to stop the infiltration. In return, some of those same extremists have now turned their guns on him. Kashmiri jihadis working with low-level Pakistani militarymen were behind two failed attempts on Musharraf's life last December. "Musharraf realizes that giving external military support to the Kashmir jihad is simply not a viable policy," says Rifaat Hussain, a Pakistani defense analyst. "He learned the hard way that support for the Kashmir jihad has a boomerang effect on Pakistani politics."

Musharraf's about-face has brought the guerrillas' infiltration down to a trickle. His hope: that by ending Pakistan's direct involvement in the insurgency against Indian forces inside Kashmir, New Delhi will reciprocate with its own gestures such as freeing imprisoned jihadis, reducing its heavy military footprint in Kashmir and beginning a dialogue with the militants. But fearful that New Delhi will simply declare the Kashmir dispute resolved and walk away from the table, Musharraf has made it clear that he can turn the jihadi tap back on if India doesn't negotiate a settlement soon. "Pakistan has given no clear signal that it's abandoning this [jihad] policy for all time," says retired Lt. Gen. Talat Masood. "Pakistan wants to keep that option in case India suddenly says, 'There's no longer any problem in Kashmir to negotiate'."

For militants like Bahai, the insurgency is far from over. He says he is still signing up new recruits and receiving an encouraging flow of anonymous donations to the cause. More worrisome, the jihadi commander says his and other groups are now sending small numbers of cleanshaven and well-dressed militants across a less patrolled southern border on the Punjabi plain along the Jhelum River and near the Pakistani town of Sialkot. Says Bahai, "The more Musharraf oppresses us, the stronger our determination and our movement becomes." Musharraf must tread carefully--or the boomerang will come around again.