Putin seems to be taking the approach of sowing as much chaos as possible. A hot war with the west is useful to him to rally the country behind him. Escalation is just another tool.
I don't have any idea about who blew up the pipeline but it's clear that Putin sees his only way out of the mess he has put himself in is escalating to the point where western countries are worried enough about the consequences to let him have some kind of concessions in Ukraine. That's not crazy if you see it as your only option.
