There was a saying from M2 that you'd hear when your diplomat really messed up a deal. It was "Diplomacy has failed us this day..."
The AI needs to learn when Diplomacy fails and when it is time to go to war for what they want. Now clearly I'm not suggesting that they backstab you right after a diplomatic mission fails, but if you continually deny their advances there should ideally be a relations hit. This could then be a contributing factor to an alliance being severed as the player is not respecting the desires of the AI faction, ect. Of course what we have now is still an improvement over M2, but there is always room for refinement.
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