He has returned to Atlantis the items that we had sent to R'lyeh as part of a plan that he apparently then immediately abandoned.
He has then set the nation to AI, as it really is rather hopeless in the scope of what is currently occurring on the land around them.
Believe me when I say, I have rather intimate knowledge of what R'lyeh has, and their near term capabilities - and it is no way impressive or competitive with any of the "strong" nations in the game now.
Atlantis is almost as bad off at this point, but I swore that if Jotun attacked us, we would bring vengeance until a true god ascends, or we are totally annihilated - and I am a man of my word.