the diplomacy system does need a total overhaul. this split you suggest may be instrumental in making (somewhat) simpler an
idea I had a while ago, one essentially of having more than simply ten cabinet positions, but rather having each (or, perhaps, most) cabinet positions broken down into (dynamic) heirarchies depending on (dynamic) portfolios. as I believe it the easiest way to explain, I'll use the German ministry of security as an example:
- one chief minister
- two ministers who oversee east and west
- under, say, the minister of the west would be one for France, one for the Benelux, etc...while under the minister of the east there would be one for the Baltic states, one for Poland, one for the Ukraine, etc...
the tiers would ideally be dynamic, so that if only two tiers are needed then only two will be available, if more then more. also, the personality of each minister would be important--a Prince of Terror who oversees the east, for example, would not take kindly to having a Compassionate Gentlemen overseeing
him, nor would he probably like one below him. thus personality, and loyalty as well, could either magnify (or, in the exampled case, detract from) the effects of the individual ministers.
as for foreign relations, the (imho fundamental) problem is that adding extra options such as various types of embargo just doesn't really have any real effect on the game. sure, as Britain you can embargo Italy if they invade Albania, but you don't need a diplomatic option
not to trade with them. the whole foreign diplomatic system needs to be revamped for it to be more meaningful, but as of yet I haven't had any (good) ideas. a well-implemented League of Nations may, however, bring (part of) the necessary dynamic into foreign politics.