You guys don't know how merchant republics worked do you?
http://en.wikipedia.org/wiki/Republic_of_Genoa
http://en.wikipedia.org/wiki/Republic_of_Venice
http://en.wikipedia.org/wiki/Republic_of_Pisa
Read this when you have time, here's a short explanation. In medieval times in Europe, Merchant republics were small city-states that conducted trade around the seas. The 3 I linked above where the 1st merchant republics, although there were many more of them, such as Gotland and The Hansa, but probably the best merchant republic was Venice. Around the time the Ottomans conquered Constantinople, Venice controlled ALL trade zones within the Mediterranean, while Genoa controlled Spanish trade zones and the black sea. That means Venice out-played Genoa and forced them to established trade far from home, which led to them fading into obscurity.
When you control the trade flow of around 50 nations, you get extremely rich, The Doge of Venice got as much money from trade as all Western Monarchs from taxes combined. Venice did some awesome things, like connect India and Europe through trade and get $ from the much desired pepper. They also conquered important land through which trade flew, they owned land in Italy, Austria, Croatia, Greece and they controlled a lot of greek islands.
I built the Republic of Etumas with a lot of elements from Venice, and I got inspired from the Free Cities in Game of Thrones to create a Kingdom with only coastlines.
But I don't like the idea of them having trading posts in Qethia. That much Isaac world never approve.
Isaac must really hate the republic, because there was no way a monarch would refuse trading with Venice. The money and the product variety received from trade was so ridiculously high that even muslim states agreed to trade.
In Europe, trade with a republic was impossible unless they built trade posts in your land. Monarchs would sometimes razed trade posts and forced the patricians to rebuild when they were mad at the republic(which they were because the Doge usually was a scumbag who dishonored alliances). But sometimes they took loans from the republics, and even hired galleys from the republic to transport troops.