OGZPY - Will the EU's gas reduction plan work as Russia cuts Nord Stream capacity?

Speaking of recession , Russia keeps cutting back on its gas supplies to Europe, raising overall economic risks for the continent. The key Nord Stream 1 pipeline is now pumping at only 20% of capacity, according to Gazprom ( OTCPK:OGZPY ), which cited maintenance problems and turbine issues that haven't been resolved. The latest announcement will make is harder and costlier for the bloc to fill up storage ahead of the winter, and saw Dutch TTF natural gas futures, a European benchmark, jump as much as 12% to €179/MWhr on Wednesday.

Bigger picture: While Moscow has blamed the supply cuts on servicing delays and sanctions, the EU has accused the Kremlin of energy blackmail and is hastily making backup plans. Each European government is trying to source as much alternative fuel supplies as they can, while working together on a strategy to reduce gas consumption by 15%. The joint proposal opens the door for rationing across the bloc, forcing heavy industrial user and factories to shut down for certain periods of time. Households and essential services, like hospitals and schools, will remain protected unless the crisis takes a turn for the worse, and targets could become mandatory in case of an emergency.

"Russia is playing a strategic game here," declared Simone Tagliapietra, senior fellow at economic think tank Bruegel. "Fluctuating already low flows is better than a full cutoff as it manipulates the market and optimizes geopolitical impact."

Go deeper: The EU's conservation measures may not be enough if Russia completely cuts off the flows. Europe has made itself super dependent on Russian gas in recent years, building out its natural gas pipeline network to Moscow instead of diversifying via LNG import terminals or beefing up alternative sources like nuclear and coal. The eurozone will also release its latest GDP print on Friday, which is expected to show that growth is stagnating, while casting a shadow on the second half of the 2022.

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