Step 1 don't patch the game, apparently the latest patch on Steam upgrades the AI on the campaign map. Before then the AIs not very smart at using the seas to get to you, if you can consistently win battles you are involved with you might just be able to win. Chapter 3 is essentially a line, you need to retreat your forces whenever they are near your opponents except for a single force you are managing yourself. If you take out the territories to the east of your capital you should gradually be able to get into the point where even without giving ground you are only fighting one battle a turn.
If you can scrounge enough gold to get a reasonably sized patrol force of ironclads you should also be able to mop up his scattered sea forces using only the imperial army. Make sure you have a few mercenaries back in case of emergencies before you try this if at all possible. If you can get a parliament and a tavern they will gradually help you gather useful cards to help dig out of this situation.
That said it might be impossible. All that idealism might not be healthy!
