You offer to defend Koi if they submit to Luathbas as vassals.
2*ahahah, my luuungs
The emissary glares at you.
"That is the most insulting offer ever heard by my ears, and my ears heard a lot. Goodbye." Then he turns around on his heels and stomps off. The dwarves are let in soon afterwards.
The smelly creatures do not look like dirty crafters; instead, they have rather impressive broadth of their sides, neatly kept beards and their cloaks look as if cleaned often.
And they don't even stink - is that lavender perfume you smell?
"Greetings, King of Luathbas!" The leader of the group, with triple-forked cinnamon beard and bald head, bows graciously. "I am Kobar, son of Alath, and I bring offer of friendship and commerce between our two nations. Rarely we find amongst humans colleagues in enterprise and appreciation for crafts of metal and jewels, and even rare are those who repay us with knowledge instead of simple gold and silver and platinum and copper. Thus, the King of the Inkorb, have sent us to ascertain whether you would be interested in allowing our kin to settle down in your capital, to facilitate services to your courtiers, and, to be honest, secure the profitable trade with those Gubta of the east." The courtiers murmur excitedly; and from your history books you know that it's exceedingly rare for dwarves to be that friendly to non-dwarves and foreigners.
A) Allow them to set up a trade post or something of the sort in capital city, under partial control of the Treasury.
B) Reject the proposal as the Damdamians/Elves/[insert political group here] will sure don't like it.
C) Allow them to set up trade posts and workshops as long as they are willing to pay taxes every so often.
D) Allow the dwarves to freely settle and trade in Luathbas as if they were its citizens.