The objective is, that both the yellow player and myself have to have a city of 1000 inhabitants, where 250 are merchants. I played the scenario twice now and I am pretty sure that I fulfilled the objectives: The yellow player was even able to build a large shipyard. So he must have had over 500 merchants. Even though, the scenario didn't stop in both cases and the next one was not opened up.

I also was stuck in the scenario for a very long time, I think in the end I edited the scenario to make it work.
Some forum posts said not yellow, but instead someone else is your allied partner or something I think, it was really weird.

Sometimes the yellow player will place his bathhouse too far from his city, so that he cannot get the needed merchants. Simply build an army, go to his island, destroy his bathhouse, make peace again. Hope for the best. If necessary, repeat.