Related, there is a story in yesterday's Times of India about Indian concerns over the beginning of a plan to divert water from the Yangtze River at the border of the Hubei and Henan provinces in Central China. The Yangtze is a river entirely within the borders of China, so at first glance it would appear that India should not be worried. However, an elaborate network of canals, resevoirs, and dams could concievably connect the rivers to the Yarlunch Tsangpo before it crosses into India. This would divert India and Bangladesh's water north to China.
Earlier this year, I had asked a geologist who specializes on the glaciers of Himilayas whether China could dam or divert the headwaters of any of their major rivers that begin in Tibet, like the Brahmaputra, the Ganges, or the Mekong. He said that such an engineering project would be impossible, because the area is so geologically active and the threat of earthquakes is too great. However, the Chinese are faced with a long-term, dire drought in the North, and they may think that massive engineering projects could get them out of that.
Certainly, diverting the flow of the Yarlung Tsangpo would provoke anger downstream in both India and Bangladesh. The question remains, though, to what extent would they go to stop it? Could conflict ensue over dwindling water resources?