At its essence, the addition of a diplomatic point system was created to promote regional alliances and break apart the dominance of mega alliances. It has done anything but that.

Imagine yourself in my position currently. I just created a nation in North America. My neighbours are Aztec, a coalition nation, Eternal Union, an alliance nation, and Floritania, another alliance nation.

As a new neutral nation, you poise yourself as easy pickings for both the coalition and the alliance. It was impossible, given my situation to attempt to be neutral. Having no allies to rely on when in a state of neutrality in the mega-alliance war isn't remotely feasible. All powerful nations that WOULD have the ability to foster the growth of a new nation are on either side of the mega-alliances. Attempting to have relations with either side would immediately face you with scrutiny for "playing both sides".

I needed to pick a side and eventually landed on the coalition. I chose them over alliance because I've been a Japanese member for the longest while. Regardless of what side I picked, I would still immediately be considered the enemy of the nations on the other side (Which I was). I was forced into picking a side because if I didn't I would receive help from nobody near me, be camped by either side and unfortunately, burn out and die.

There is no place for a "Third side" or "Regional conflicts" on CCNet simply due to the nature of existing nations and mega-alliances.

The coalition and alliance will continue to exist through informal agreements outside of the server. The diplomatic point system is not splitting these mega-alliances into bits, all it's doing is providing a nine-day cooldown for allying nations that are already part of a mega-alliance. The diplomatic point limit does absolutely nothing but inconvenience already-established mega-alliance nations, and directly harm new nations looking to join existing alliances. Nobody is going to allow you into their mega-alliance because, at the end of the day, new nations aren't worth wasting the diplomacy points on. (or even dropping an ally for!!).

Hell, my only coalition ally ingame right now is Aztec, I was told that I would get allied should I get sieged. Not exactly the system stomping out mega-alliances, is it?

The concept of diplomacy points themselves are fine. The execution of them, in my opinion, was completely flawed.

I can't think of a solution besides a major overhaul that actually will force regional alliances to be the meta, or just the complete removal of the system altogether.