When you say bloodpets, do you mean beastmen? Since you are at peace with the barbarians, you can't attack their cities. However, you can flip a city to your side with culture if you plant a city close enough and boost its cultural output.
Also, the peace with the barbarians will be broken if you become the score leader by more than 50%. So, later on, if you start winning the game you'll be able to take it by force.
I wouldn't be too concerned about it for now. Just build around it and assume it will join your empire later once your cultural radius starts to overlap it.
If the dragon spawns there, switch to Council of Esus and try to steal his treasure.