Political prisoners imply that there is some level of distrust between two countries, but that there are also people in those countries that want them to be friends, or adhere to a treaty. In such a case, one or both countries will send valuable high level individuals to the other side, as sort of a "Hey, here's our princess; we give you the right to kill her or whatever else, if we break our treaty or induce aggression against you. We trust you with her, if you trust us."
So, given the times (the Belkan wars), it would have been a way to develop a truce between Shutra and the Kaisers. Perhaps gaining some measure of support from Shutra in the form of troops, or securing an alliance, or just having a non-aggression pact enforced. In the case of royalty or political females being given, it can also imply a prelude to an arranged marriage as a way to bind two nations. At one time, it may have been considered for Olive to marry Claus (or someone else in the Shutra royal house).
So, we don't know exactly why, but given what we know about political prisoners and the times, we can make some rough guesses.
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