Breaking the blockade would most likely involve destroying their navy and the infrastructure that allows Marienburg to block the river, and probably anchoring a Dreadnought or five off the coast in case they get any funny ideas about rebuilding.
I'd also like to point out this bit:
Ulthuan's treaty with Marienburg makes them money, so they're happy it exists in its current position. But at the same time, they do not want to get into a war with the Empire.
The sanest reading of them being vague is that they are currently unwilling to fight on behalf of Marienburg (likely due to Finubar being in charge) and don't want to be caught in a lie. If they were happy to support Marienburg militarily they would say so, as it would make such a war less likely.
It is possible that Ulthuan ha military obligations to Marienburg via treaty, but such would be defensive in nature. They will not aid them in setting up a blockade (except monetarily, perhaps) and they absolutely will not get into a war with Barak Varr, and thus the Karaz Ankor, enforcing such a blockade. Not whilst Finubar is on the throne, and probably not otherwise.
I'm just sitting here pondering if we should send some people directly to the elves. Breaking up the Marienburg monopoly would be a good thing for the Elves as they can set their own prices for the goods they produce. It would benefit all, unless there's some politics at play and we've got some very influential elves in Marienburg itself who act as middlemen to all the trade coming into the city.
Most of the Empire's rivers flow through Marienburg. Them closing their gates is effectively a blockade.
The thing is, Barak Varr is footing the bill on this canal to the tune of billions of dollars, then because of Marienburg we're going to ask them to ALSO prop up the ENTIRE EMPIRE for FIVE YEARS? On TOP of digging the canal.
They'd be entirely within their rights to be like 'Welp, see ya' and drop the project. They probably wouldn't because I can't imagine dwarves like leaving things half-finished. But you know the Empire would in a hot second.
Okay, caught up on the discussion, I think the big mistake being made here isn't a decision of whether attack or not is right.
The big mistake is timelines. I'm seeing
wildly off base timelines in play here.
Blockade Breaking
-Barak Varr has to sail significant numbers of Ironclads, powerful ships which are expensive to operate, and slow to travel, around basically the entire continent. You're talking about a Norway to Constantinople equivalent sail here, this will take months. Possibly a year if you include preparing the ammunition, food, and fuel needed to get there and fight off the gribblies along the way, and then camp there for several years. During this time the Empire is
still embargoed.
-Ironclads cannot be beaten on the open sea by Marienburg naval power alone. However, this changes dramatically if they are assaulting the city's gates proper, as poorer quality fixed emplacement cannon
can damage and match Ironclads in range, as can wizards casting from the city. A Comet of Cassandora would be bad news for an ironclad unless they came with a Runesmith complement, which would cost extra to put a runesmith on effectively garrison duty instead of doing research or forging.
--This essentially means that the Ironclads must either tolerate being harassed by significant attacks for the full period
or, the far more expedient means of leveling any structure in the city which could launch a significant attack.
---It is likely, though not certain that the elf embassy would be such a structure.
----It is possible, but not certain that there may be elves in residence who may try to take a potshot at the invaders, because they have friends whose livelihoods are being reduced to kibble by dwarves.
----It is possible, but not certain that some of the dwarves on the ironclads may take an opportunity to take a shot at the elf embassy. While dwarves as a whole are disciplined, they can be extremely impulsive on certain things.
Therefore, building a Blockade Breaking decision tree:
-Marienburg threatens embargo.
--Imperials fold and pressure the Karaz Ankor. This might work but is unacceptable, because it lets Marienburg know that this works.
--Imperials threaten Barak Varr intervention.
---Marienburg folds. This assumes that Marienburg actually believes the threat, believes that Ulthuan would not back them, and believes that they can't beat ironclads from a position of all possible advantage on home waters. This is possible but unlikely, too many pride points in play.
---Marienburg calls bluff.
----Barak Varr does not back up the threat. Possible, but unlikely, if something they did caused an ally to be attacked they'd likely back it up.
----Barak Varr backs up the threat.
-----Ulthuan lends overt aid immediately. Possible but unlikely, because this straight out goes to bad end since Thorgrim HAS to back it up.
-----Segments of Ulthuan lends c/overt aid immediately. Possible that at least one young idiot said "meh I can take them". This incidentally means the Blockade Breaking could fail, because even if they don't destroy the ironclads, the journey is long enough that elven raiders and harassment can render it logistically infeasible to actually park a fleet of ironclads at Marienburg for five years. Ironclads are tough but throwing storms at them can delay their travel massively. In the meantime the Empire is still blockaded.
-----Ulthuan does not immediately intervene, Ironclads reach Marienburg.
------Marienburg folds when it comes to actual violence at their door, once the ironclads shred whatever fleet comes out. This is the ideal blockade breaking outcome. The ironclads just need to park there.
------Marienburg doubles down and fights back.
-------Ironclads are rebuffed because Marienburg had invested centuries of prep into naval defenses. I'm not sure how plausible, but it could happen if they had the right wizards(they have wizards) and the dosh to build super towers(they have dosh)
-------Ironclads just clear the physical obstructions and act as occupying navy and they're cowed. This requires Marienburgers being sensible.
-------Ironclads clear the physical obstructions and they keep fighting. So Ironclads start reducing the city to stop that.
--------Ironclads do so without interacting with the Ulthuan embassy in any way. Victory for the Empire and the Karaz Ankor.
--------Ironclads attack Ulthuan embassy on purpose or by accident, or Ulthuan embassy attacks ironclads on purpose or by accident. The order doesn't matter. This is how you get a formal insult to Ulthuan that they MUST answer, and which Barak Varr is never going to back down from.
Trade Mitigation:
-Marienburg threatens embargo
--Imperials fold and pressure the Karaz Ankor. This might work but is unacceptable, because it lets Marienburg know that this works.
--Empire informs Marienburg they never needed you anyway. Marienburg starts suffering major economic losses. Empire starts suffering significant economic losses. Karaz Ankor commits economic resources to propping up the Empire's economy(this doesn't mean making a loss immediately, but it does greatly reduce their ability to commit to or respond to anything else).
---Marienburg leaders backs down because their domestic audience will crucify them for the losses. Refer RL plague shutdown reactions by corps.
---Marienburg domestic audience is fine with losing money across the board for five years. Wait out the full five year period, massive economic damage and vulnerability.
---Marienburg domestic audience is not fine with losing money, current leadership is eventually ousted and replaced with less stupid leaders. Wait for several years to settle this out, before embargo ends.
---Marienburg goes with covert operations to force the Empire to fold before they are forced to fold. Shadow war. Somebody will be left without pants and it ain't Dragomas.