Diplomacy is to embrace Conservative strategy (7)
I believe the answer is:
tactics
'strategy' is the definition.
(I've seen this in another clue)
'diplomacy is to embrace conservative' is the wordplay.
'diplomacy' becomes 'tact' (tact can mean diplomacy or sensitivity).
'to embrace' indicates putting letters inside.
'conservative' becomes 'C' (UK political abbreviation).
'is' enclosing 'c' is 'ics'.
'tact'+'ics'='TACTICS'
(Other definitions for tactics that I've seen before include "Art of manoeuvring" , "Plans" , "Skill of using available means to reach an end" , "The means adopted to achieve an end" , "Short-term strategy" .)