Yes, having the Chancellor be your ally is crucial during a Civil War and it was intentionally created that way. The way I saw it in LotR (and still do) a properly prepared civil war involves political campaigning to put yourself into a position where you can then seize whatever you want with military power. For the same reason, it is also important to stockpile military units when you can get them so that if an enemy comes after you while a hostile Chancellor is in power, you can still survive. I like this kind of system very much, because it forces people to use politics (and thus IC moves) in order to win civil wars. This seems realistic to me and focuses the game towards domestic interaction rather than attacking the AI.
The end of LotR was a direct result of such a situation. Zim was a heavy backer of Ignoramus, who was the son of the previous Emperor, but had not inherited the throne due to game mechanics. Zim and Ignoramus made sure that Zim got elected as Chancellor, and then Zim used his time to build up massive armies for Ignoramus. When the final war started, this resulted in Ignoramus having such a large force at his disposal that he was essentially invulnerable unless all his foes united against him from the start. They did not do this, and thus Ignoramus was the victor... all because he made sure to get an ally elected as Chancellor and that Chancellor specifically used his powers to boost Ignoramus.
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