Yes, this is correct. While you may be rival powers, you are part of the same major faction, and that major faction does not approve of the murder of it's own citizens.
Think of it like this: Country A has 3 major powers.
- A ruling political party, with control of the countries standing military
- An opposition party with it's own paramilitary forces
- A large corporation providing the country with a majority of it's GDP. Has it's own security forces to protect it's assets.
If that countries ruling party decided to invade Country B, notwithstanding any typical opposition, it'd be "OK" according to that country.
Likewise if the large corporation engaged in skirmishes with Country B's military over a natural resource, Country A's ruling and opposition parties might actually consider that OK.
But Country A is a democracy. The country votes to decide who is in power, the incumbent party or the opposition. If a member of the opposition used part of it's paramilitary force to *attack* the incumbent government, that would be considered outright treason by the incumbent government and probably most of it's citizens. Furthermore, the opposition might actually distance itself from that member to save face.
That's what's going on when you destroy ships belonging to an opposed power, who belongs to the same major faction. You're committing an act which is considered unacceptable by the major faction your power is aligned to.
The only way you can undermine powers who belong to the same major faction is to interdict it's supply vessels and steal the cargo they are carrying *without* destroying them (otherwise you take that penalty), which is incredibly difficult and not rewarding at all.
tl;dr it's working as expected,
as terrible as it is.
