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Poor Geographic Efficiency can undermine a nation’s combat ability in two ways: by causing some of its defenses to become inert, and by limiting its ability to benefit from the resources it has captured.
If a nation’s Geographic Efficiency falls below 100%, then some of their defenses will immediately become inert and stop functioning. This will happen even if the nation generates enough energy to maintain all its defenses — because poor Geo limits the ability to transport and utilize that energy. If a nation’s Geo reaches 50%, say, then 50% of that nation’s defenses will become inert.
Low Geographic Efficiency will also limit the benefit that a nation can derive from the resources it has captured. Say a nation has occupied four Iron Deposit resources, and each one boosts their Tech stat by +3. Normally, they would receive a total +12 bonus from these. However if their Geo is only 50%, they would only receive 50% of that bonus, +6. This would limit the nation’s combat performance, both for attack and defense.