In Phezzan, Rubinsky explains his plans to a bishop of the Earth Cult. He will use his contacts in the Free Planets Alliance, such as chairman Trüniht, to make the Alliance crumble from inside, paving the way for an Imperial victory. Then, Reinhard is to be murdered. Kesselring is sent to the Alliance's commissioner in Phezzan, saying the financial support can continue only if the Alliance is a stable democracy, hinting that Yang is willing to seize power. In Iserlohn, Alex Cazellnu is concerned about Yang's safety: for the time being, his skills are needed, but he fears that Trüniht wants to dispose of him in the end. In Heinessen, Trüniht, who dislikes Yang's popularity, asks the Secretary of Defence, Negreponte, to form an inquiry committee about Yang's action during the coup.

January 1, 796 S.C. / 487 I.C.: in the Astarte star system, a 20 000 spaceships Imperial fleet under Reinhard von Lohengramm's command is about to be cornered by three Alliance fleets of 13 000 spaceships each. Against the advice of his subordinates, Reinhard decides to strike first in order to defeat each fleet before they can join. The Allied commanders, trusting the overall odds of 2 to 1, don't anticipate this and rebuff Yang Wen-li's advice to quickly regroup their forces.

After the destruction of the 4th and 6th fleets, Reinhard's fleet engages the 2nd Fleet. When its commander is wounded, Yang takes command and manages to escape utter destruction. In Phezzan, Adrian Rubinsky, administrator of the planet, and Nikola Boltik, his main adviser, make comments on the battle and note that it won't change the strategic situation.

Susanna von Benemünde, a former favorite of the Emperor, wants to get rid of Annerose and win back the Emperor's love. She teams up with Flegel, who hopes that a scandal involving Annerose will lead to Reinhard's downfall. Annerose is abducted: she is to be killed and found with a supposed lover from the lower class. She is rescued by Kircheis, Reuenthal, Mittermeyer and Oberstein. Benemünde is forced to commit suicide. Flegel has been smart enough to leave no proof of his involvement, but Oberstein and Reinhard suspect him anyway.

A new admiralty is created for Reinhard. He chooses commoners and lesser nobles to command his fleets: August Samuel Wahlen, Cornelius Lutz, Karl Gustav Kempf, Fritz Josef Bittenfeld, Ernest Mecklinger, Wolfgang Mittermeyer and Oskar von Reuenthal. Meanwhile, Maximilian von Kastrop has rebelled against the Empire. He thinks he is safe because of the "Artemis Necklace", a system of powerfully armed satellites built with the help of Phezzan. Reinhard sends a fleet under Kircheis' command to put an end to the rebellion. He manages to destroy the necklace. Kastrop is killed by his retainers and is the only casualty of the operation.

Thirty years ago, marquis Klopstock was exiled form the imperial court. He asks prince Braunschweig, the Emperor's son-in-law, to ask forgiveness on his behalf. Braunschweig invites him to his daughter's birthday party. Klopstock's real goal is to bring a bomb in order to kill the Emperor, who will be there. At the party, Reinhard clashes with baron Flegel. The bomb is taken away by accident and makes little damage. Klopstock commits suicide and all the incident is kept secret.

Yang is sent to Thernussen (Heinessen's second largest city) with his ward, Julian Minci, to attend a ceremony at the Military Academy. He meets Jessica Edwards, who is campaigning for the Peace Party candidate in an upcoming election. We learn that Yang, while being loyal to democracy, has no love for the current politicians. The P.K.C. sets a bomb in the Peace Party's headquarters, killing the candidate, but their plan backfires when Jessica, who is the new Peace Party candidate, wins a landslide victory.

January, 798 S.C. / 489 I.C.: Admiral von Schaft, head of the Science and Technology Division, works out a plan to take Iserlohn back. The Geiesburg fortress is to become a mobile fortress by adding warp engines: its firepower is a match to Iserlohn's, so the Imperial fleet will be able to defeat the Iserlohn Fleet. The operation will be under Admiral Kempf's command, with Admiral Müller as second-in-command. In Phezzan, Rubinsky decides to support the plan and asks Kesselring to find a way to move Yang away from Iserlohn. Some of Mittermeyer and Reuenthal's background is revealed.

Yang is summoned to Heinessen, where the Secretary of Defence is holding an inquiry. This move shocks his staff because such a committee has no legal basis. In Phezzan, Kesselring enlists two former members of the Lippstadt League, Leopold Schumacher and Alfred von Landsberg to carry out a plan we know nothing about. March 13, 798 S.C. / 489 I.C.: the test of the warp drive of the Geiesburg fortress is a success. The fortress and its supporting fleet can now move to the Iserlohn Corridor and attack the Alliance's fortress.

Reinhard celebrates the new year with his officers. The citizens on Heinessen panic and question the government's handling of the situation. Admiral Bucock is chosen to lead the defense of the Alliance. The Alliance situation is dire as the fleets are greatly weakened from past campaigns, the only intact fleet is the 1st fleet. The 14th and 15th fleet are then created from a hodgepodge of 20,000 ships from around the Alliance. The military leaders of the Alliance realize however, they do not have enough ships to block the exit of the Phezzan corridor. Yang is given free rein over any future actions for the 13th fleet. January 8, 799 S.C. / 490 I.C.: The first Imperial fleet, led by Mittermeyer passes through the Phezzan corridor into Alliance territory.

Yang decides to take Iserlohn by a ruse. The Rosen Ritter (Knights of the rose), a ground combat unit made of Imperial exiles, will pose as an imperial crew and infiltrate the fortress. Yang's staff is introduced: Murai, Patrichev, Fischer (a master of fleet maneuvers) and Frederica Greenhill, daughter of admiral Dwight Greenhill. The Iserlohn fleet is lured away from the fortress by decoys. When a damaged imperial spaceship asks for help, the commander of Iserlohn, who doesn't know where his fleet is due to radar jamming, authorizes it to dock...

August, 22, 796 S.C. /487 I.C.: the invasion of the Empire has begun. Reinhard implements a scorched earth strategy: all food is taken from the frontier zone, so the "Liberation force" of the Free Planets Alliance will be forced to feed the inhabitants. Reinhard plans to attack the invading fleets when their supply lines will be overstretched. Commodore Ulrich Kesler carries out the orders but, in the process, has to face someone from his past.

January 1, 798 S.C. / 489 I.C.: Reinhard von Lohengramm is now Premier and Commander-in-chief of the imperial military. He implements many reforms for the welfare of the people. Meanwhile, an training sortie, under Dusty Attenborough's command, turns out to be Julian Minci's first battle as a fighter pilot. The Attenborough Fleet is on the verge to be crushed, but Yang Wen-li, with the help of Admiral Merkatz, goes out of Iserlohn with the whole fleet and saves the day (January, 16).

Admiral Kessler, chief of the Military Police, informs Reinhard that two former members of the Lippstadt League (Landsberg and Schumacher) have arrived in Odin, and may be involved in some plot. Reinhard asks Hildegard for her advice: shes thinks they are in fact sent by Phezzan and will try to abduct someone, probably the young Emperor. later, she pays a visit to Annerose von Grünewald (Reinhard's elder sister) and persuades her to let Reinhard increase the security measures. Reinhard summons Boltik, the Commissioner of Phezzan, tells him he knows everything about their plan, and asks what is Phezzan's interest: Boltik answers that Phezzan expects to control the space communications and trade in an unified Empire. Reinhard agrees to act according to Rubinsky's plan, only if Phezzan grants a free passage through the Phezzan Corridor to the Imperial Fleet.

The young Emperor passes through Phezzan into Alliance territory. The Alliance government declares that they will shelter the refugees while the nobles announce a government in exile. Merkatz is appointed as secretary of defense without his own consent. August, 20, 798 S.C. / 489 I.C.: Reinhard declares the government in exile kidnapped the young Emperor in an underhanded act of cowardice. The public within the Empire mobilizes in support of Reinhard's declaration of total war.

Julian is assigned to Phezzan by central command. Yang and his staff decide to assign Mashengo to be Julian's body guard. Yang shares with Julian his thoughts about the possibility of Phezzan allying with the Empire due to the power balance being shifted. Julian mentions the possibility of Phezzan allying with the Empire not because of realist means, but instead out of ideological or religious reasons. Julian agrees to be of use to Yang and go to Phezzan to spy on any developments. The Iserlohn staff say their goodbyes to Julian.

Julian arrives on Phezzan. The next evening, he attends his welcome party. Julian spreads conjecture about a possible invasion of Phezzan from the Empire. Reinhart organizes his fleet for operation Ragnarok. Admiral Bucock tries to warn the Alliance National Defense Council about a possible Phezzan corridor attack, but is ignored. November, 20, 798 S.C. / 489 I.C.: Admiral Reuenthal leading an Imperial Fleet of 36,000 ships lays siege to Iserlohn. Carrying out the first part of Operation Ragnarok.

Julian and friends leave Phezzan on a cargo ship. Julian tricks the captain of an Imperial destroyer and captures the destroyer. Reinhard organizes and briefs his fleet on the invasion plan. The Imperial fleet has a 3 to 1 fleet number advantage over the hodgepodge fleet of the Alliance. The Imperial and Alliance fleets are days away from a battle in the uninhabited Rantemario star system.

In Odin (capital planet of the Galactic Empire), Reinhard is promoted to imperial admiral after his victory at Astarte. With his friend Siegfried Kircheis, he pays a visit to his elder sister Annerose, the Emperor's favorite. In a flashback, Kircheis remember how he and Reinhard became friends, how Annerose was taken away from her home to be the Emperor's favorite and how they came to hate the high nobles and the Goldenbaum dynasty.

Admiral Bucock informs Julian that the alliance government is trying to divide Yang from his allies as a way of preventing any future powergrab by Yang. Reinhard discusses his plans on using the Phezzan corridor with his Admirals, calling the plan Operation Ragnarok. Over 1 million ships are planned to be in the fleet. Reinhart speaks with Oberstein and discuss the use and eventually the expendability of Boltik, current Commissioner of Phezzan. Oberstein creates a secret police with Lang as the leader. September 20, 798 S.C. / 489 I.C.: 8 month old Catherine succeeds the throne of the Empire as the new Empress.

In the Free Planets Alliance, the capture of Iserlohn has intoxicated the public, the military and the politicians. It is possible to invade the Empire from Iserlohn, and many people think it's time to conclude the crusade against tyranny. In the High Council, Joan Lebello (Secretary of Treasure) and Hwan Lewi (Secretary of Human Resources) think it's better to sign a peace treaty because the economy in on the verge of collapsing, but the Chairman explains that they will lose the next election unless they achieve a substantial military victory, so the High Council decides to invade the Empire; only Trüniht sides with Lebello and Lewi. The invasion plan is drafted by commodore Andrew Fork, an ambitious man so sure of the righteousness of the war that he discards any objections, especially those made by Yang, as siding with the enemy. The Free Planet Alliance will send a force of 8 fleets, 30 million men and 200 000 spaceships under the command of admiral Lazar Lobos, with admiral Greenhill as second-in-command. Meanwhile, in Phezzan, Rubinsky warns the Imperial High Commissioner that the Free Planets Alliance is planning a full scale invasion of the Empire.

While the inquiry continues, Greenhill tries to find out where is Yang and discovers that the government controls the media and leaves little room for the opposition: the Free Planets Alliance is a democracy in name only. When the news of a new imperial attack reaches Heinessen, the inquiry is suspended and Yang sent back to Iserlohn. However, the journey will take at least four weeks: Yang's staff thinks about a strategy to hold on and not let the enemy know that Yang is not there.

The Mittermeyer and Reuenthal Fleets meet the retreating Imperial fleet and destroy the Alliance's pursuing ships before falling back when the Iserlohn Fleet shows up. In Odin, Müller is forgiven by Reinhard. Reinhard tells Hildegard von Mariendorf that power should not be inherited, but seized. In Phezzan, Kesselring explains to Rubinsky that the Free Planets Alliance is on the verge of bankruptcy; they decide to go on with their plan. It is revealed that Kesselring is Rubinsky's illegitimate son. Back in Iserlohn, Yang shares with Julian Minci his thoughts about military strength and how it is often used against the citizen it was supposed to protect.

July 6-7, 798 S.C. / 489 I.C.: Landsberg and Schumacher kidnap the young Emperor under hidden underground tunnels within the palace grounds. Admiral Molt commits suicide over his failure to guard the grounds and product the Emperor. Hildegard sees through the kidnapping and confronts Reinhard over why he allowed the kidnapping to take place. Reinhard explains he cautiously joined with Phezzan as a method of justification for the Empire to invade the Alliance.

Yang is promoted to Fleet Admiral as he lands on Heinessen. Yang clarifies his war plan to the government of the Alliance. The war plan is to attack the spread out Imperial fleet and lure out Reinhard. If Reinhard is killed, his admirals will lose their unifying force, potentially causing infighting. Julian and Yang go out to dinner and catch up on the events which have happened in the last few months. Merkatz leads the exile Imperial government fleet to join with Yang's. Reinhard has a flu and thinks of the past. The end of February, 799 S.C. / 490 I.C.: The unified Alliance fleet launches from Heinessen.