Right, but Mathilde has to believe the Dawi are likely to do this. And I haven't seen people actually arguing that the Dawis are likely to go for it , if presented with the choice of blockade breaking or compensating the Empire. I've seen people asserting that the compensation scheme is politically possible, and I've seen people arguing the Blockade is likely to happen, but no-one has actually weighed the two and asked why one would be preferred over the other by the Dawi. And yes, maybe we fear escalation, but will the Dawis make the same calculus of escalation risks?
Now, if Mathilde believes Barak Varr will not go for a blockade because Barak Varr itself will take into account Ulthuan's potential response, then the considerations of escalation makes sense. If Mathilde on the other hand believes Barak Varr is likely to escalate to Blockade Breaking, then advising the Chamberlain that the Dawis are open to compensation is advised not based on whether Mathilde thinks it's realistically possible, but what Mathilde hopes can happen.
I think the key difference between breaking the blockade and supporting the Empire through the blockade for Barak Varr really comes down to money. Not for Barak Varr, but for the Empire.
If Barak Varr acts to support the Empire, then Barak Varr will shell out a pile of money to keep the Empire limping along until the canal is done. If Barak Varr acts to break the blockade, it'll shell out a pile of money moving ships around to break the blockade, keep it broken, and maybe replace a bunch of ships after a naval battle or two with the Asur.
Both situations present massive monetary outlays for Barak Varr, but the exact material costs are very hard to pin down due to a decent number of unknown factors. What is known, is that in both cases Barak Varr stands to make a large amount of money off of the Empire sending trade out through the canal. Only, the relative amounts there aren't the same - in one case, the Empire has been suffering through 5 or more years of an embargo while in the other case that embargo was broken relatively shortly and the Empire could go back to business as usual for the rest of the time it took to build the canal.
In essence, the amount of money Barak Varr stand to gain off of the canal is based off of how much international trade the Empire has, which is itself based on the size of the Empire's internal economy. The shorter the period of the Empire being blockaded and needing to limp by on what overland trade it can manage is the less damage will be done to the Empire's economy, and therefore the more international trade it will have and the more money Barak Varr will stand to make off of the canal.
So the deciding question for Barak Varr is this: Will deploying ships to break a blockade on the Empire cost more in deployment and brinksmanship costs (potential lives lost, trade unprotected, and replacement ships needed) than they stand to gain from an economically stronger Empire compared to an Empire that's gone through a major recession?
The less likely you think brinksmanship is to produce major costs and the more economic damage you think the Empire would suffer during a 5 year blockade, the more attractive the blockade breaking action looks. Conversely, the more likely you think brinksmanship is to incur a massively expensive war and the less economic damage you believe the Empire will sustain during an embargo, the more likely it is that Barak Varr would prefer to pay a Weregild rather than take military action.
Personally, I'm very much in the camp of "A prolonged embargo would be devastating, the Asur and Dawi are unlikely to escalate, and if they do escalate aren't really in a situation where they could easily do massive damage to each other", so I support breaking the blockade - but your mileage may vary depending on your estimation and weighting of each of those factors.
