Well, you need some way to determine who is the victor, if victory is not complete.
If you want to theorise, I choose your second option.
Ageod games are not the only ones that use this system. Look at a victory screen in WitP-AE.
They are given by bases controlled and losses inflicted, equivalent to cities controlled and elements losses inflicted in Ageod.
But there is also a third factor in Ageod, VPs are lost by political points.
However it is not listed in the manual, but appears in-game.
Edit: yes, it is working the NMs ans the VPs are reduced the next turn.
But no idea on how that huge number is calculated, 0 and 45 are the political points for von Klug and von Falkenhayn. The 0 is strange.