Putin Signals Gas Pipeline Will Restart as Clock Ticks Down

(Bloomberg) — Russian President Vladimir Putin signaled that Europe will start getting gas again through a key pipeline, but warned that unless a spat over sanctioned parts is resolved, flows will be tightly curbed.

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Europe is on tenterhooks, waiting to see whether gas flows resume on Thursday when maintenance on the Nord Stream pipeline is set to end.

Putin gave the clearest signal yet that Moscow plans to restart at least some flows. Then on Wednesday, early data showed the first orders via the pipeline for Thursday — an indication of buyers’ expectations, though far from a guarantee flows will resume.

In any case, flows will be curbed — just as Europe needs gas to fill up storage. Instead, the bloc is being forced to find dramatic energy savings.

Putin made clear that if a pipeline part that was caught up in sanctions isn’t returned to Russia, then the link will only work at 20% of capacity as soon as next week — as that’s when another part that’s now in Russia needs to go for maintenance. After frantic diplomatic efforts by Germany, the turbine is on its way home from Canada.

“If another comes, two will operate. If not, just one, so 30 million cubic meters will be pumped per day,” he told reporters after a summit in Iran late Tuesday.

He wants the part back in Russia, along with all its paperwork, he said. Gazprom PJSC said on Wednesday it’s yet to receive the correct documentation.

Read: How Nord Stream Became So Important in Europe’s Gas War

Gas prices fluctuated as traders struggled to make sense of Putin’s comments. On the one hand, it’s positive as many in the market expected flows not to come back at all. But the conditionality just adds to the uncertainty.

“It’s absolutely clear that Moscow is cutting supplies for geopolitical reasons — it wants to create a European gas crisis this winter to bring Europe to its knees to the point where it cuts support to Ukraine,” said Tim Ash, a senior strategist at Bluebay Asset Management.

At the moment no gas is flowing through the biggest pipeline to Europe because of maintenance. Before the works, gas was flowing at about 40% of Nord Stream’s capacity. Russia has also curbed flows through other routes, such as via Ukraine.

Nord Stream AG said on Wednesday it’s sticking to its maintenance plan. Gazprom declined to comment on the order data. The orders assume that Nord Stream flows will resume at the pre-maintenance level, or 40% of transport capacity, according to German grid operators that channel the arriving Nord Stream gas into two onshore links. The start-up may take several hours, they said.

At dawn on Thursday, gas traders and policy makers alike will be waiting to see if the gas starts flowing.

The European Union is working on the assumption flows will be cut and pushing for steps to reduce consumption. The threat of shortages is undermining the euro and adding to the risks of recession, particularly in industrial powerhouse Germany, which is heavily dependent on Russian gas. The International Monetary Fund warned on Wednesday that Germany is in danger of losing almost 5% of its economic output in the event of a cutoff.

Read: Germany’s Faustian Pact With Russia Haunts Industrial Giants

(Updates with comments from German grid operators in fourth paragraph.)