PRESIDENT CLINTON personally led the American diplomatic effort to cool down Kashmir. He can fairly claim credit for seeing to it that Pakistan, the offending party, is backing off. But even if the crisis calms, the strategic situation in South Asia has been transformed. Before, the United States was politically on the outside of the Kashmir dispute. Now it is being drawn in. The simple reason is that with India and Pakistan both notching up their nuclear status, their failure to resolve their Kashmir differences could have consequences inimical to American interests.

The Clinton administration is caught up in a gathering contradiction. It insists that its steps to dampen the fires -- in particular its urging of Pakistan to recall Islamic insurgents and Pakistani regulars from India-held Kashmir -- does not amount to mediation or negotiation but only to the focusing of international "attention." But the president has now expressed his "personal interest" not exactly in negotiating but in encouraging the resumption of earlier talks on Kashmir between India and Pakistan.

The administration doesn't want an up-front or pivotal "broker's" diplomatic role, not least because to take such a role would put off India, which strives to keep Kashmir a bilateral issue and fiercely opposes its "internationalization." But neither does the administration want to miss a diplomatic opportunity. This is how Washington finds itself semi-disengaging and semi-engaging at the same time. It is an unstable posture. Whether it can be sustained under the pressures emanating from the new nuclear equation in South Asia is uncertain.

Meanwhile, the United States seeks to join with others to induce Indians and Pakistanis to get back on the track of the home-grown diplomatic initiative known as the "Lahore" process. This is the track the two countries were carefully pursuing until their confrontation in the high Himalayas overtook them six weeks ago. Can Lahore improve bilateral relations enough to offset the new nuclear burden? Pakistan is smarting under the double lash of Indian military victory and American pressure to withdraw; the Sharif government is in trouble. India is enjoying a period of being widely thought to have the merits on its side in the mountain fighting and is in no mood to offer the people of Kashmir a taste of self-determination. But nuclear bombs or no, India's denial of this democratic benefit in Kashmir is what the dispute remains basically about. An initiative along this line would earn India rich tribute.