#but ingame it can get really confusing
When the Imperials came, they seriously upset the power structure in Morrowind as well as establishing some trade relationships that might be seen as exploitative. Their relationship with most Dunmer (at least ones that did not directly profit from this arrangement) was thus somewhat tense.
Politics
The Empire is largely responsible for the confusing spagetti-like nature of Morrowind’s politics. Traditionally the country was a theocracy ruled by the Tribunal and the Grand Council, with local political matters handled by individual Great Houses. In order to consolidate power in Morrowind, the Imperials imposed a completely different political system over top of the native one, and they exist concurrently. This takes the form of system of Dukes and Governors, presided over by a figurehead King. The Skeleton Man Interviews also mention an ineffectual “Imperial Proconsul” stationed in Narsis. These figures were largely selected from the Empire-friendly Hlaalu faction, which caused bitter tensions between ruling groups, and directly caused the decline of House Indoril, who had been the dominant House for three thousand years prior to Imperial rule. “On Morrowind” describes how the armistice sparked a power grab by Hlaalu, taking over a number of Indoril towns in a series of bloody coups.
We also see tensions between the religious leadership and the imperialized leadership: for example, the power struggle between Hlaalu Helseth and Almalexia in Mournhold. The Imperially sanctioned rulers hold a great deal of power in Morrowind, and the construction of all settlements on Vvardenfell are at the Duke’s discretion. A number of these individuals, such as Governer Ordal Helvi are corrupt leaders. Most Dunmer see the King as an imperial puppet and prefer council rule according to morrowind dialogue. At best, the Dunmer tend to see the Imperial leadership as ineffectual and out of touch with the Province, while at worst they see them as hostile and exploitative invaders attacking their institutions and exploiting their resources. The old guard views Imperial rule as inherently blasphemous and a large number of Indoril leaders actually committed suicide when the armistice was signed.
The Imperial Office of Census and Excise is an administrative arm responsible for conducting headcount, assessing and collecting taxes, handling import licenses, incorporating mercenary guilds, and investigating tax evasion and smuggling. I’m not sure what their relationship to the Duke/King/Emperor is.
In terms of law, again Morrowind is under two coexisting systems, the Imperial and the native. Conflicts between these are governed by the Armistice, which mostly settles in favour of Dunmer tradition in regards to slavery, religion, necromancy and the authority of the great houses. It seems the Empire was willing to make concessions in favour of protecting Dunmer religion and self governance in exchange for very strict control of Morrowind’s resources and economy. They’re kind of hands off, letting Hlaalu use the puppet government for their political advantage while focusing mainly on their trade relationships with morrowind.
Economics
The Imperials forced Vvardenfell to be opened up for trade and settlement so that they could profit from the Ebony, Dwemer artifacts, and other resources in the area. Since prior to this the island was a sacred temple reserve, the move did not really endear them to the religious Dunmer, although a number of factions (especially the Telvanni) used it as an opportunity to expand their holdings. They established the East Empire Trading Company to handle extracting these resources from the region, an organization which proved to be as problematic as its real-world counterpart. The board of directors is appointed directly by the Empire and acts in accordance with Imperial interests. Despite the Empire’s official anti-slavery stance, the company had no problem exploiting local customs and ran an enormous Ebony mine out of Caldera which appears to be one of the largest slave-holders in Vvardenfell. The Empire profited enormously from this hypocrisy.
The Empire had a chokehold on trade and services in Morrowind. The EEC had a legislated monopoly on the trade of all Dwemer artifacts from the region, meaning that the Dunmer had no right to the history and artifacts of their own land. These sorts of restrictions are part of why smuggling is such an enormous industry in Vvardenfell. They also held a monopoly on raw ebony, glass, and flin. It is illegal to mine or export Ebony without an imperial charter. The monopoly had the unintended consequence of fueling an enormous black market headed by the heavily anti-empire Cammona Tong crime syndicate. Even for items which they do not have sole authority over, the EEC enjoys favourable tariffs and regulations that give them the upper hand in exportation. The Armistice also grants the Mages’ Guild a monopoly on magical training and services, a situation you are asked to negotiate in the House Telvanni questline.
There is also something kind of shady going on where the Empire has a high tax on local alcohol and a low tax on Flin imported from Cyrodiil, which the EEC just happens to have an import monopoly on. Essentially they are preventing Dunmer from affording their native liquors in order to sell them cheap flin, which only the EEC is allowed to import. Again, this fuels a smuggling ring for local alcohols which appears to have ties to the Sixth House.
Many Dunmer seem to have been hoping to return to an independent Morrowind. The Nerevarine cult believed that the Nerevarine would deliver Morrowind from Imperial rule, while the Sixth House also had a mandate to drive out the Empire. The Cammona Tong sympathized with them for this reason. Hlaalu found their relationship with the Empire profitable, but even Helseth wanted to shrug off some Imperial control and consolidate native power. In my opinion however, the Empire’s real strategy was not to control Morrowind politically so much as economically, since resource exploitation was their true motive. As soon as the relationship was no longer profitable to the Empire post red-year, the province was largely abandoned to its own devices and the feudal kingship system the imperials introduced disappeared.
