Does the AI use 'peace' and 'war' between factions

[Nick_K]

At the beginning of the game all factions are at peace.

The AI will consider a war has started if you attack it or if it attacks you. If you both attack someone else's province (or a neutral one) and end up fighting it doesn't consider that a declaration of war.
Once war starts the AI will basically attack you forever.

The AI seems to pick the weakest border province as a target. It will usually conquer most indep provinces forst then choose a province with few troops & low PD. If you can keep narrow borders with the AI and place solid armies there you can usually keep the peace for a while.

So, if the water faction is at war with you already, then it will attack you in preference to its other neighbours, unless they launch an attack against it.