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Follow the rules on the map image.
In addition, you may only ally ONE other nation. This can be revoked at any time, and is automatically revoked if two allies are the only ones left in the end.
There is a limited amount of nations that may be made. If it is full, and one is defeated, their may NOT be another one created. Also, they can only be created in unclaimed territories. Same rules apply when rolling for origin territory.