With Sodium:

Without Sodium:

The underwater fog colors still work with Sodium, but the surface color and transparency always use the default colors.

Full mod list:

architectury-11.0.11-fabric
fabric-api-0.95.1+1.20.4
Minecraft-Legacy-1.20.4-1.3.2-fabric
sodium-fabric-mc1.20.3-0.5.5

Side note — this is not related to my previous report about ImmediatelyFast being incompatible. I solved that bug by creating a new, clean instance. This is a mod compatibility issue.

No wonder why it looks very opaque.

Unfortunately, even with some workarounds, Sodium uses the alpha for the lighting of the water too (for some reason), so the water transparency with sodium is broken, because the difference of light/transparency causes this blending issue:

But the water color with this fix works well

Fixed in version 1.3.3, there are some incompatibilities with newer versions of the Fabric API.