Blocking or diverting rivers is not an easy task, being outright impossible if the river is big. The water still has to go anywhere, and if it doesn't flow to your neighbour country it will flood yours. Retain enough water and your dam will break. With a small river it's an easier task, but the smaller it is, the more negligible its blocking will be to the other country. Country A is at odds with country B, so country A decides to block a river to pressure country B. It takes $2b and 12 years to build a dam to block the river. Is it worthy?
Dams are very expensive, and they take a lot of effort to build. By the time it is finished the spat could be over. Dams are built to provide your own country with water for human consumption, irrigation or power generation, not as tools of political pressure over neighbours.
That doesn't mean that they are not instruments of very serious political and diplomatic conflicts. Building a dam upstream of a river affects its flow downstream, with a lot of ecological and economical implications. If the dam is used for irrigation, a good part of the river waters won't ever flow down, effectively reducing the amount of water available to downstream neighbours. This is a matter of serious concern, since if the water level drops too much it may cause serious disruptions there. Egypt is threatening to attack Ethiopia, while Iraq shows serious concerns about Turkey's dams on the Tigris - the difference in tone being caused by the relative forces among the incumbents.
But neither Ethiopia nor Turkey are building this dams with the purpose of "applying pressure to neighbour countries", and once built is very complicated to use them that way - even if you can cut the waters downstream with a dam, it's not advisable to do so. First, it's internationally condemned, due to its heavy ecological, economical and public health impact everywhere down the dam (certainly including parts of your own country); and second, if a dam fills too fast it can collapse.
So, while you can reduce the flow of the river, you can't halt it, which greatly reduces its usefulness as a tool for political pressure. While the reduced flow has an impact downstream, it is not near as critical as total lack of water would be, and unless the dam is completely dry and you are starting to fill it, you can't keep this reduced flow downstream too much time before your dam threatens overflowing.