Current game I'm Russia , China fighting Germany. China takes 4 of Germany's cities meaning I lose 3 resources( I was trading for), sending my larger cities into unhappiness....so for pure selfish reasons I join the war on Germany's side.

Well I take the four German cities and gift them all back to Germany, and get my resources back in trade.

But Germany is still only "cautious with me"...where on the pluses and minuses is "you liberated one our our cities"?

And for giving a nation four of its cities back , surely that should be worth at very least a + 2 or 3 to relations..

Or am I missing something?

That's wierd...it sounds like an oversight in the diplomacy programming.

If you just capture it youself and gift it to them after you get a +4 for trading relations have been fair i believe , never liberated a city for a ally but it should at least get a +2/city imo.