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Washington’s Oil Price Cap Won’t Work-And Putin Knows It

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Washington’s Oil Price Cap Won’t Work-And Putin Knows It


For the previous a number of months the U.S. has been procuring round different superior democracies a scheme to coordinate the location of a cap on the worth Russia can cost on its power exports to deprive Putin of revenues fueling his battle in Ukraine. A virtually 50% rise in Moscow’s influx of oil and fuel export revenues has been pushed by the sector’s skyrocketing costs because the onset of the battle. To Putin’s amusement, Washington’s try and cobble collectively an settlement amongst its allies to cap the worth Russia can cost for its oil and fuel gross sales has not been simple going for Washington.

U.S. allies are rightly circumspect concerning the convoluted design of Washington’s plan in a market that’s way more complicated than the U.S. understands; its capability to perform the acknowledged purpose—terminating Putin’s belligerent conduct in Ukraine; and that it’s proposal gained’t backfire, inflicting substantial prices on the superior democracies, certainly excess of it’s going to on Russia.

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In the meantime enlarged oil and pure fuel revenues nonetheless make their approach to Moscow; the bloodshed of Ukrainians mounts; and the already quite a few casualties of younger Russian male navy conscripts rise exponentially.

Sadly, this isn’t shocking.

In reality, it’s bedeviling why Washington has not proposed more practical coverage devices available that might considerably curb Russia’s oil and fuel export revenues and thus considerably shrink Putin’s battle chest.

It’s arduous to grasp why Washington has not centered on instituting options, together with market-oriented, clear and extra economically intuitive mechanisms drawn from the arsenal of worldwide commerce coverage.

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The Basic Flaws of the U.S. Oil Worth-Cap Scheme

The design of Washington’s proposed oil price-cap is contorted and inextricably fraught with contradictions. Probably the most salient of those is this system depends on command-and-control mechanisms—that’s, non-market-based measures—for setting the ceiling worth (“the cap”).

However that worth isn’t pushed by provide and demand. Reasonably it includes imposing an artificially constructed margin above notoriously difficult-to-estimate Russian per barrel extraction and manufacturing prices.

As in all oil and pure fuel producing nations, not solely do these prices range throughout the wells in Russia’s useful resource producing areas, however additionally they will not be mounted, altering over time. As such prices rise or fall, the U.S. scheme would require altering the extent of the worth cap to take care of consistency. If adjustments within the price-cap weren’t made, incentives and disincentives could be created throughout wells resulting in a loopy quilt of spatial output distortions.

It’s not troublesome to think about that the establishment of such an administrative framework and the distortions it’s going to produce would engender much more danger into world oil and fuel provide and demand than is already the case on account of the battle in Ukraine thus placing upward, not downward, strain on costs for oil and fuel. The chances are this might create a bias in the direction of extra not much less oil and fuel revenues making their approach to Putin’s coffers.

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Washington’s program additionally could be exceptionally troublesome to watch independently, creating alternatives for evasion and corruption—not simply in oil transactions carried out in Russia, however in payments of lading for transporting Russia’s oil and fuel exterior its borders; how customs prices are utilized; insurance coverage charges for oil tankers; and so forth. As anybody who has labored on the bottom in Russia and related kleptocracies (suppose: China) is aware of effectively, such command-and-control measures and alternatives for corruption are precisely the kind of paradigm through which Putin thrives.

In reality, fears have arisen by the U.S. of the potential presence of such aberrant habits—not solely by Russia and its international allies who buy its oil (suppose: India) however even amongst oil and fuel market members inside the G7 nations. This has pushed Washington to contemplate the imposition of a community of secondary sanctions to curb such dishonest. The contemplation of resorting to such steps is prima facie proof that Washington is fearful its chosen paradigm for penalizing Russia is filled with holes.

Extra basically, the design of the U.S. coverage appears to replicate that its core framers and advocates lack deep practitioner information of how the worldwide marketplace for oil and fuel is definitely structured and capabilities. That is odd as there isn’t a scarcity of such specialists and seasoned executives inside the business throughout the U.S., together with in Washington.

Suffice it to say, that market is notoriously complicated and comprised of a large number of geographically dispersed events with extremely differentiated pursuits, lots of whom are extraordinarily refined. To many, this may increasingly belie the truth that oil and pure fuel are comparatively homogeneous commodities that commerce throughout a number of borders each day.

In precept, such homogeneity can foster dishonest on regulatory constraints positioned on oil and fuel exports, corresponding to these to be imposed on Russia. In spite of everything oil and pure fuel will not be branded per se. Certainly, it’s not as if they’re simply marked by totally different colours, smells, or labelling. Nonetheless, info flows monitoring tanker shipments, for instance, are more and more refined and strong—that’s except intentional mislabeling of such provides and different types of evasion and corruption happen.

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Nonetheless, the success and effectiveness of the U.S. price-cap coverage (certainly of any financial coverage) in the end is determined by the extent to which the events involved (the U.S. and the opposite superior democracies, together with their residents, corporations, employees and customers) perceive the goals and the mechanics of the price-cap. Regrettably, on this case, there was a elementary incapability by Washington to reach its messaging.

Maybe the starkest instance of that is that Washington’s pursuit of the price-cap relies on the hope of reaching a number of goals which might be largely inconsistent with each other. In addition they run counter to highly effective market forces.

In a nutshell, the U.S. is looking for to cap oil costs at ranges decrease than the at present excessive market charges generated by the battle in Ukraine to alleviate the softness in world financial development they’ve engendered. But on the identical time, the U.S. is looking for to set a worth stage for oil that’s simply greater than Russian oil manufacturing prices in order to not take away Russian oil provides from the world market that in any other case would exacerbate the autumn in world GDP development. This tangled set of goals of attempting to “have your cake and consuming it too” is without doubt one of the principal causes allies haven’t signed on to Washington’s program.

Skilled framers and executors of public policymaking know effectively the golden rule for fulfillment: If an initiative’s design is overly complicated; its rationale can’t be expressed in a compellingly intuitive method the place the linkage between trigger and impact is abundantly evident; and its workings lack enough transparency, that’s its demise knell.

To this finish, it isn’t a superb signal that in Washington’s marketing campaign to bring-on allies to the price-cap proposal it’s having to reformulate the mannequin time and time once more, inevitably including on “bells and whistles” to search out “takers.” Whereas the price-cap is well-intentioned, it shuns classes from a long time of policy-making—in oil and plenty of different markets: Advanced “Rube Goldberg” schemes virtually all the time fail. Is it any surprise the U.S. is having bother enlisting the assist of its allies?

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Potential Paths Ahead to Undercut Putin’s Targets

The unhappy irony of the U.S. oil price-cap proposal is it stands in sharp distinction to the management Washington displayed in February executing a effectively thought out, complete set of monetary sanctions by the world’s superior democracies on Russia’s banking system, associated establishments and Putin’s cronies quickly after Russia’s invasion of Ukraine. It amounted to a sanction technique whose cross-country coordination and effectiveness is unprecedented during the last half century. (One must look again to the sanctions utilized to South Africa for its apartheid regime between the Fifties and Nineteen Nineties to discover a comparable technique.)

Are there various sanction methods concerning Russia’s oil and fuel sector Washington ought to contemplate in lieu of its price-cap regime? Sure. Listed below are two.

One could be for the U.S. and its allies to use a uniform tariff on imports of Russian oil and fuel. Collectively coordinated, such a regime would make Russian oil extra costly on world markets thus curbing income accruing to Putin.

In fact, it might additionally improve oil costs customers face within the nations imposing the tariff. However the distinction between this technique versus an oil worth cap oil is that the additional revenues from the tariff would accrue to consuming nations’ treasuries. Would such a hike within the worth of oil consuming nations face increase power prices and thus stunt financial development? Maybe. However not if the governments in query direct the tariff revenues to stimulate home consumption and productive investments: suppose, larger spending directed towards job creation and building in public mass transit or related initiatives.

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A second type of oil-specific sanctions could be for the U.S., allied with a number of different giant oil producers—Canada, Saudi Arabia, Iraq, United Arab Emirates, Brazil, and Kuwait—to ramp up manufacturing and flood the world oil market with further output to drive down oil costs Russia is ready to earn. Such “predatory pricing” could be a sure-fire technique to make the most of oil as a automobile to weaken the muse of the Russian financial system.

This might appear to be a no brainer sanction to be placed on the desk. In idea, not less than. Why?

For starters, the Saudis have just lately moved within the precise wrong way—limiting output. Past Canada it isn’t clear whether or not the U.S. might get the Saudis and different giant oil producers to go together with this strategy. Lots of them have far much less antagonistic—certainly even benign or pleasant—relations with Russia.

Ought to Washington, London, Brussels, and Ottawa be capable to persuade Riyadh to broaden output, that might absolutely drive down oil costs. However it’s unlikely—given the general dimension of the worldwide oil market and the extra quantity of oil the Saudi’s (at present) might produce—that costs would fall dramatically sufficient—and stay at a stage—to inflict vital hurt on Russia’s oil revenues.

To try this, coordinated releases could be wanted from oil consuming nations’ stockpiles, such because the U.S. Strategic Petroleum Reserve (SPR). And such coordinated drawdowns would have to be each substantial (relative to the present quantity of oil within the world market) and sustained.

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The purpose is to not solely improve provide sizably relative to demand, but additionally ship a credible sign to the general oil market that the supply-demand stability has structurally shifted. Failing to do each will unlikely have the specified affect on oil costs. A absolutely unsatisfactory end result could be one the place an enlargement of provides fails to maneuver costs decrease. In reality, if such a technique does backfire, it might effectively end in oil costs to improve since oil patrons and sellers might lose confidence within the stability and integrity of the market.

Regrettably, the core difficulty for efficient predatory pricing stays this: whereas conceptually flooding the provision of worldwide oil markets to cut back oil costs could possibly be the best strategy to penalize Russia, the fact is that present world oil shares are unlikely to be giant sufficient for this to work.

Equally vital, even when coordinated drawdowns are carried out adroitly and do considerably decrease world oil costs and thus adversely have an effect on Russia, they could additionally engender new dangers to grease consuming nations on the home entrance.

First, there could be heightened nationwide safety dangersexcept our petroleum stockpiles had been capable of be replenished rapidly sooner or later and with low-priced oil.

Second, there could be elevated environmental dangers because the cheaper oil would serve to stimulate consumption and thus emissions of greenhouse gases and erosion of progress made on sustainability.

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Mitigation of such dangers, nonetheless, might be completed if surcharges had been added to our retail costs of fossil fuels with a view to curb extra consumption of them. Certainly, it is a coverage that, as I’ve argued elsewhere, ought to have already been in place within the U.S. Regrettably it has not. Like the gathering of revenues from the import tariff scheme described earlier, these surcharges would go to nationwide treasuries and will fund various power investments and new infrastructure in mass transit, for instance, whereas Russia could be solely capable of obtain low costs.

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As is nearly all the time the case, it’s uncommon to search out financial insurance policies which might be “silver bullets.” A cautious evaluation of the advantages and prices throughout imperfect options—together with their relative workability—should be weighed. The shortage of simplicity, transparency, and safety towards corruption inherent within the oil price-cap scheme all level to its questionable efficacy and the necessity to devise options.



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US Defence Сhief Says Washington Will Not Let Ukraine Fail

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US Defence Сhief Says Washington Will Not Let Ukraine Fail


Defense Secretary Lloyd Austin promised Tuesday that the United States will not let Ukraine fail, even as further aid remains stalled in Congress and Kyiv’s forces face shortages of munitions.

The Republican-led House of Representatives has been blocking $60 billion in assistance for Ukraine, and the United States has warned that a recent $300 million package would only last a few weeks.

The “United States will not let Ukraine fail”, Austin said at the opening of a meeting in Germany of Ukraine’s international supporters.

“We remain determined to provide Ukraine with the resources that it needs to resist the Kremlin’s aggression,” he added.

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Washington announced $300 million in assistance for Ukraine last week, but Austin said it was only possible due to savings on recent purchases by the Pentagon.

“We were only able to support this much-needed package by identifying some unanticipated contract savings”, Austin said.

Ukrainian President Volodymyr Zelensky said in a statement the day before that it is “critically important for us that the Congress soon completes all the necessary procedures and makes a final decision” on aid for Kyiv.

Top US military officer General Charles “CQ” Brown told journalists en route to the Ukraine meeting that Kyiv’s troops are “having to pay attention to their supply rates, and how they execute.”

There is an “incremental kind of back and forth between Ukraine and Russia”, with “incremental gains on both sides”, Brown said.

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Other Topics of Interest

Ukraine ‘Hacktivists’ Fighting Russia on Digital Front

The hacker group was born out of a call 48 hours into Russia’s invasion by Ukraine’s Digital Transformation Minister Mikhailo Fedorov for Kyiv to create an “IT army”.

But he noted that “even as the Russians have gained territory, they do it at a pretty big cost in number of casualties, like in personnel, but also in number of pieces of equipment that are being taken out.”

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Austin said in his remarks Tuesday that “at least 315,000 Russian troops have been killed or wounded” since Russia launched its all-out invasion of Ukraine in 2022 — a figure that was previously reported at the end of last year.

Moscow has also “squandered up to $211 billion to equip, deploy, maintain, and sustain its imperial aggression against Ukraine,” he said.

Austin and other US officials have spearheaded the push for international support for Ukraine, quickly forging a coalition to back Kyiv after Russia invaded and coordinating aid from dozens of countries.

Washington is by far Kyiv’s biggest donor of security aid, committing tens of billions of dollars to aid Kyiv since February 2022.



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Analysis | Israel’s war on Hamas brings famine to Gaza

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Analysis | Israel’s war on Hamas brings famine to Gaza


You’re reading an excerpt from the Today’s WorldView newsletter. Sign up to get the rest free, including news from around the globe and interesting ideas and opinions to know, sent to your inbox every weekday.

The warnings were being sounded for weeks. The United Nations, international relief organizations and some foreign governments voiced their fears over the ongoing humanitarian calamity in the Gaza Strip, where more than 2 million Palestinians are caught in the crosshairs of Israel’s punishing campaign against militant group Hamas. Food and other critical supplies remain scarce, while aid deliveries have been stymied by Israeli authorities that encircle Gaza’s borders.

Those warnings reached a crescendo Monday with the release of new report by the Integrated Food Security Phase Classification (IPC), a global multi-stakeholder initiative working on food security and nutrition analysis. It found that 1.1 million people in Gaza — roughly half the beleaguered territory’s population — are expected to face catastrophic levels of hunger and starvation between now and July. Many of those at immediate risk live in Gaza’s devastated northern regions, which are cut off from the south by Israeli forces and receive only a paltry trickle of the already-meagre aid that’s entering Gaza.

The fact of a “famine” is tied up in a complicated set of bureaucratic criteria, as my colleague Andrew Jeong outlined. It is usually declared by governments, though some U.N. officials have done so in contexts where no prevailing governing entity was capable of formally assessing the situation. The IPC uses a five-tiered classification system where “famine” is the fifth tier and “emergency” the fourth.

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“Compared to the IPC’s previous analysis in December 2023, acute food insecurity in the Gaza Strip has deepened and widened, with nearly double the number of people projected to experience those conditions by July,” my colleagues reported. “In the IPC’s five-tier classification of food crises, Gaza now has the largest percentage of a population to receive its most severe rating since the body began reporting in 2004, Beth Bechdol, deputy director general at the Food and Agriculture Organization, told The Washington Post.”

What makes this calamity all the more stunning is that it’s entirely the product of human decisions: Gaza’s civilian population is starving because of an Israeli siege, not an earthquake, extended drought or other natural disasters that have blighted parts of the world subject to famine. That reality is agonizing for U.N. officials.

“We haven’t seen that rate of death among children in almost any other conflict in the world,” Catherine Russell, head of the U.N.’s children agency, told CBS News’ “Face the Nation” program Sunday. “I’ve been in wards of children who are suffering from severe anemia malnutrition, the whole ward is absolutely quiet. Because the children, the babies … don’t even have the energy to cry.”

“This is the highest number of people facing catastrophic hunger ever recorded by the Integrated Food Security Classification system — anywhere, anytime,” U.N. Secretary General António Guterres said in a news briefing Monday. “This is an entirely man-made disaster — and the report makes clear that it can be halted.”

Martin Griffiths, the U.N.’s top humanitarian official, said more than 1 million people are at risk because they have been cut off from aid, markets have been collapsed and fields destroyed. “The international community should hang its head in shame for failing to stop this.”

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Israeli officials, chiefly Prime Minister Benjamin Netanyahu, appear unmoved by the state of affairs. They blame Hamas for bringing about this crisis and reject growing calls for a cease-fire, which now include prominent Democratic lawmakers in Washington. “In the international community, there are those who are trying to stop the war now, before all of its goals have been achieved,” Netanyahu said in an interview on CNN over the weekend. “If we stop the war now, before all of its goals are achieved, this means that Israel will have lost the war, and this we will not allow.”

On Monday, international humanitarian organization Oxfam released a report outlining how Israel has stymied or constrained the delivery of aid, including attacks on humanitarian convoys, “unjustifiably inefficient” processes of inspection of the relief supplies, and denial of access to humanitarian officials and aid groups.

Israel has been using “starvation as a weapon of war,” for more than five months, Sally Abi Khalil, Oxfam’s Middle East and North Africa regional director, said in a statement. She said that the humanitarian situation in Gaza has “actually worsened” since the International Court of Justice ordered Israel to enable more aid into the enclave. “Israel’s deliberate manufacturing of suffering is systemic and of such scale and intensity that it creates a real risk of a genocide in Gaza,” she said.

That’s rhetoric that mainstream politicians are also echoing. “In Gaza we are no longer on the brink of famine; we are in a state of famine, affecting thousands of people,” Josep Borrell, the European Union’s top diplomat, said Monday at the start of a conference on humanitarian aid for Gaza in Brussels. “This is unacceptable. Starvation is used as a weapon of war.”

But respite is not in sight, with Israel and Hamas still at loggerheads over the possibility of a cease-fire brokered through U.S. and Arab mediators.

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“For nearly a month, the news coverage has been about efforts being made toward a truce,” Atef Abu Saif, a Gaza-born novelist and the Palestinian Authority’s minister of culture, wrote in an op-ed for The Washington Post that detailed his mother’s death in a tent in Gaza. “Just a temporary truce! After so many weeks of such modest hopes, ‘truce’ has become everyone’s favorite word: a cherished, idealistic, holy concept. It’s such a meager thing to hope for — a few days without killing. But even this feels out of reach.”





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Michigan lawyer who claimed election fraud arrested after Dominion hearing

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Michigan lawyer who claimed election fraud arrested after Dominion hearing


An attorney for former Overstock CEO Patrick Byrne was detained at the federal courthouse in Washington on Monday after defending her decision to disseminate internal documents from Dominion Voting Systems in an effort to revive long-debunked claims about the 2020 election.

Stefanie Lambert was facing a bench warrant from a state court in Michigan, where she is accused of taking part in a conspiracy to tamper with voting machines in hopes of finding proof of fraud. She is simultaneously representing Byrne, who is being sued for defamation by Dominion over related falsehoods claiming the firm’s machines enabled vote tampering.

The U.S. Marshals office in a statement confirmed Lambert was arrested on Monday afternoon.

In D.C. court Monday, Lambert admitted that she made public emails she obtained as Byrne’s lawyer and shared them with a southwestern Michigan sheriff who was also investigated as part of that alleged plot. Over 2,000 pages of the documents were put on the social media site X this month by an account using the sheriff’s name and photograph.

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Dominion requested Lambert be removed from the case following the release of the documents.

“It has been nearly four years. When does it stop?” Dominion attorney Davida Brook asked in court. She said the company brought suits against Byrne and others “to stop the lies, to end the threats of violence.” Now, she said, Lambert was “using these very lawsuits … to spread yet more lies and do yet more harm.” Dominion employees have received a fresh round of violent threats as a result of the disclosures, Brook said.

Magistrate Judge Moxila A. Upadhyaya said she needed more time to decide whether Lambert should be removed from the case. But the judge said that in the meantime, both Lambert and Byrne could not access to discovery materials, and that Lambert must move to seal the Michigan court document containing Dominion’s records.

After the hearing ended, the other attorneys left while Lambert was asked by the judge to stay behind. Several U.S. Marshals then entered the courtroom and locked the door behind them. Lambert never left through the public courtroom entrance; there is another exit through which detained individuals are transported.

Lambert’s Michigan defense attorney, Daniel Hartman, declined to speak on her whereabouts Monday but said that her failure to appear in court in Michigan “was not willful.” Instead he said it was because of “mixed messages” about whether she had to get fingerprinted while challenging the court’s orders. Just before Lambert appeared in court in D.C., Hartman asked the Michigan judge to reconsider the warrant for her arrest. “To compound onto this entire tragedy, you have an arrest warrant that probably shouldn’t be issued,” he said.

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Lambert only recently became Byrne’s lead attorney in Washington, but she said in court that she had been helping with the case since late last year and gained access to the documents sometime “after the holidays.” Given that she had them for weeks, if not months, Upadhyaya asked why Lambert did not file a motion to undo a protective order, which the lawyer signed, barring disclosure of those documents to anyone not involved in the case.

Lambert responded that she was under no obligation to adhere to the protective order because the emails contained “evidence of a crime,” suggesting the situation was analogous to being handed “a dead body” as part of the case discovery. Specifically, she alleged that they were proof that “Dominion conspired with foreign nationals in Serbia” to undermine the U.S. election system. Dominion’s attorneys responded that this was a “xenophobic conclusion” based only on the fact that the company has some overseas employees. A Dominion spokeswoman added in an email that “any allegation that Dominion employees anywhere tried to interfere with any election is flatly false.”

Lambert said in court that she gave only Barry County Sheriff Dar Leaf access to the Dominion case discovery storage, which Brook said totals over a million pages. But Lambert said Leaf shared the documents with other sheriffs and members of Congress. Leaf, who has not been charged in the Michigan case, did not immediately return a request for comment.

Lambert said Byrne shared the documents with “the U.S. Attorney’s Office.” She said she did not know which one; there are nearly 100 U.S. attorneys running federal prosecutors’ offices across the country. Lambert argued that Byrne is “a national intelligence asset” who was entitled to “national security information” with law enforcement. Byrne has claimed he was instructed by the FBI to pursue a romantic relationship with Maria Butina, a Russian national who was convicted of being an unregistered foreign agent in 2019. (Former FBI officials have called Byrne’s claims “ridiculous.”) He did not appear in court Monday; asked about the documents he said by text message, “I’m just a humble concerned citizen.” Upadhyaya said he must be in court for the next hearing on whether his lawyer should face penalties.

Right now, Upadhyaya said, her goal was “to prevent further bleeding” of protected information into the public sphere. “I will deal with the ‘why’ later,” she said. But, she told Lambert, “the analogy of the dead body rings hollow to me.”

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Dominion was alerted to the leaks by Byrne’s previous attorney, Robert Driscoll, who told them that he had “asked Ms. Lambert to take immediate steps and reasonable efforts to prevent further disclosure of Confidential Discovery Material.” He added that he “had no advance knowledge” of the disclosure, only learning about it when the documents appeared on social media. One such post had already been viewed over 150,000 times by Monday afternoon, Brook said: “The cat is out of the bag.”

Lambert’s criminal trial is set to begin next month. A trial date has not been set in the Dominion case. The company last year settled a similar suit with Fox News for $787 million dollars, and is also suing former Trump attorneys Rudy Giuliani and Sidney Powell along with the right-wing television station OAN and the pillow businessman Mike Lindell.



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