Part 1: Suikoden IV, abridgedAs I mentioned in the OP (but will repeat here because no one reads OPs), this game is a direct sequel to Suikoden IV. As such, I will assume that you're at least somewhat familiar with the events in that game. Thus, for those who (understandably) do not care to play or read my LP of the game, here is a summary of the plot up until this point.
The story began some 15 years before the game, when the queen of the island nation Obel...
...found the Rune of Punishment - one of the 27 True Runes, which are basically godlike artefacts governing all aspects of the Suikoden universe - in an old ruin.
The rather inappropriately named Rune of Punishment governs "atonement and forgiveness" and, like all True Runes, it's a bit of a prick. Unlike most of the rest - which, while they generally fuck up your life beyond recognition, also tend to grant eternal life - this Rune actively kills off its bearer. Consider it a magical plot virus with a 100% mortality rate, except it doesn't so much spread as it jumps to the next person when it's done with its current host. (The exception is if there's no one nearby when the host dies, which is how it got stuck in that ruin to begin with.)
After carrying it for a while, the queen used the Rune to blow up some invading pirates, and also herself. Her youngest child, a boy blessed with neither name nor personality, was knocked overboard in the process. (Mysteriously, a completely unrelated young child washed up on the somewhat nearby island of Razril somewhere around this time, and was taken in by the island's lord, Vincent Vingerhut.)
As time passed, the Rune of Punishment changed hands (literally, because it settles on the bearer's left hand) several times. At some point, it found its way to this kid, who used it to blow up some assholes who set fire to his village... and also himself. (Are you noticing a theme here?) After that, the Rune jumped to his father, a man named Graham Cray.
Cray wanted nothing to do with it, so he told it to go fuck itself. Exactly what happened to it after this is unclear, but Cray replaced his arm with a cool metal claw thingy and eventually started obsessing over the Rune he had thrown away.
After a few detours, the pirate Brandeau took possession of the Rune.
Meanwhile, the mysterious boy who washed up in Razril grows up a bit and enlists in the island's force of knights, best known for riding rickety boats while wearing heavy metal armour. This is where Suikoden IV begins. (This is also where the thread decides the guy on the picture should be named Lazlo.)
Not long thereafter, Brandeau attacks a ship escorted by Razril knights. He is mortally wounded and the Rune abandons him for the knights' commander, Glen...
...who uses it once and blows himself up because he's way too old and wizened to be a JRPG protagonist. The Rune jumps to the mysterious boy, who is obviously a much better choice for the role.
Unfortunately for Lazlo, Glen was like the only person with half a brain on the entire island, so the remaining knights accuse him of murder, tell him to and put him on a tiny raft in the middle of the ocean. This is a terrible punishment, but the less said about the ocean in Suikoden IV, the better.
By some miraculous coincidence, Lazlo eventually gets picked up by a ship from, of all places, the kingdom of Obel. The Rune on his left hand draws some attention, and the king (widowed husband of the aforementioned queen)...
...decides to let him stay on the island, despite the magical plot nuke.
Pretty soon thereafter, Obel comes under attack from the nation of Kooluk, located to the north.
So Lazlo blows them up. But not himself, because he's the protagonist and that would make for a very short game.
Graham Cray is one of the driving forces behind the attack, because he wants that Rune back, damn it! Well, too bad, because he can't have it.
Anyway, the king realizes that despite having a guy with a giant plot laser on their side, Obel can't hold out forever against Kooluk's fleet, so he, Lazlo and their minions all take off on a bloody big boat, leaving Kooluk to occupy the island.
As they're fleeing Obel, the gang bumps into Kika, the most badass pirate queen on the seven seas, and they decide to team up and kick Cray right in the crayfish. Kika also tells Lazlo to seek out the tactician Elenor Silverberg, who has been permabanned from the Scarlet Moon Empire for mod sass and now spends her days waging wars on her liver.
Elenor joins the group after she lets slip that she has History with Cray, but leaves the player to wonder what's up with that.
Then a lot of unrelated shit happens and I'm not going over it because it deals with elves. Elves are assholes and no one cares. The game basically falls apart at this point and sadly it never gets its shit together again. Lazlo goes around telling all the islands to cooperate with him and sinks a bunch of Kooluk ships without breaking a sweat because the large scale combat minigame in Suikoden IV is basically impossible to lose.
After picking up all the optional characters, the group makes an attack on the Kooluk fort El-Eal and Elenor walks in being all IT LOOKS LIKE YOU HAVE SOME MINOR PROBLEMS
Cray pretty much goes CURSE YOU ELENOR and then he makes you fight a tree.
Once you kill it, the fortress starts crumbling because that's what happens when you kill an endboss.
Lazlo gets the fuck out and blows up the fort with the Rune of Punishment and then he dies.
(Unless you recruited all the characters in the game, in which case he survives.)
Cray and Elenor both remain in the fortress and presumably both die horribly when it blows up except No One Ever Found The Bodies so who knows what actually happened they're dead okay.
The king of Obel returns home to his recently liberated island and unites the island nations into a federation.
No, seriously, the end. That's Suikoden IV. If it seems disjointed, rest assured that it's not just you. The important bit here is that Cray was a bit of a dick, Kooluk invaded the Island Nations, and that the attack was repelled. This ended the conflict, at least for the time being. The islands decided to work together to better be able to face any future threats and started rebuilding all the shit that got wrecked in the war. These are the circumstances in the light of which Suikoden Tactics should be viewed.
For a more detailed account of these events, feel free to read the Suikoden IV thread, but be aware that the game is a miserable mess of wasted potential and you're not really missing out on much by sticking with the summary.
Now, on with the good part.