Faced with massive defaults, the Jade Falcons cut back spending. They left the Roman People's Movement on the eve of victory over the Roman Republic. The RPM had been fighting their war slowly for centuries and the Generalship no longer had much confidence in their chances of success. Intelligence had been pared down due to budget constraints and no one took the RPM's claims of an "imminent collapse" seriously. Without Falcon support, they had enough power to shatter The Republic's forces, but not enough to consolidate stragglers or deal with the resulting insurgency. The situation in the Roman territories deteriorated, but was ignored by the rest of the world until the Formation of the Clans.
The largest Jade Falcon economic commitments were to the army, the air force, and the populace's social programs. They chose the populace and air forces, honoring the promises of their collectivist society and realizing that the air force would hold the Persians at bay more effectively than another conga line of wrecked Timberwolves.
Which isn't to say that the army dried up. Battlemech regiments still existed and fought at the end of The Persian Bottleneck, but they were poorly provisioned until the new economic plan came to fruition. While German battlemech forces generally treated them with honor, Persian forces were no less vicious than in the opening days before Dogg Station. The Persian War is a romanticized time in Jade Falcon media, much as the Wild West is in America.
The Jade Falcon Cloud Command was not necessarily well-provisioned either; Commander of the Cloud VanderVahn Chistu, a former mechwarrior, funneled convertible bomber components to a black market for 'mech parts. The Jade Falcon air forces, the first line of defense versus Persian and German bombers, were beset by "Chistu glitches," technical problems that could never be solved because replacement parts were of the same inferior quality. Chistu was discovered and marched in stocks from Dogg Station to Hellas. On the soil the best Jade Falcon pilots called home, a local riot overwhelmed his guards and Chistu, now an old man, was hung from a pile of German bomber wreckage.
During that time, leaders of the Hausen Clan suspected what no one else could have conceived; Jade Falcon leaders and warriors had put the good of their own people above their own welfare. Hausen warriors bid away their pristine machines and entered battle hobbled to let skill decide the outcome of their battles with the Falcons 'mechs. This difference in the treatment of their enemy created a rift between the two allies. In the end, the Germans pulled out of Persian territories, leaving the savages to their own devices. Behind their borders, they continued probing with air attacks and preparing for the day they could explode out on the Jade Falcons with numbers and ferocity.
The conquest of Persia was one of time and outlay of forces. Initially, Persia had only volunteered to harry the Falcons to assist their German allies. With a loss of German support, they were unable to carry the war effort or position themselves strongly enough to negotiate a peace. When the next Jade Falcon economic plan came into effect, Timberwolves marched anew on Pasargadae, Bactra, and eventually Persepolis.
Then, there were two major forces in the world. Both immeasurably strong, martially-bent, and intent on reducing that number to one.