The main goal of the Confederates was similar to that of the Americans in the Revolution; they wanted to hang on long enough that their opponent, while stronger overall, would get tired of the fighting and would be willing to negotiate.
They were coming close in the Summer of 1864. The American public was growing weary of the casualty lists which never seemed to produce a victory. Lincoln privately told people that he expected he would lost the upcoming election. The Democrats had made a negotiated end to the war part of their party platform.
As it turned out, this was the low point. By November, the United States had won several important victories and Lincoln was re-elected. The United States would go on to win the war in April 1865.
But suppose things hadn’t gone that way and the war had dragged on until November without any major American victories and the public voted for the Democrats and their plan to end the war. And for the sake of argument, let’s assume there were also no major changes between November and March when Lincoln’s term ran out.
At this point, what kinds of terms could the Confederates have expected? The incoming Democrats had stated their willingness to negotiate but I don’t feel they were willing to agree to any terms as a price for peace. The United States was still stronger than the Confederacy overall and American troops held a lot of southern territory.
For example, American forces had held New Orleans and the entire length of the Mississippi River since the summer of 1863. This transportation route was seen as vital to the American economy. I don’t see any way that the United States would have been willing to hand it back to Confederate control.
Tennessee was also pretty much completely occupied by late 1864 and I feel the Americans wouldn’t have been willing to give it back.
There were other areas that would have been disputed. American forces occupied a good portion of northeastern Virginia and a number of southern ports. Was there anything, other than an offer to stop fighting, that the Confederates could have offered to get some of this territory back?
Would the Confederates have been willing to keep fighting if the United States wasn’t willing to give back the disputed territory? Or would they have had to settle for forming a country within the borders that existed on the ground at that time? (It would be ironic if the Confederates started the war over a disputed claim to two forts and ended up agreeing to the loss of a much larger amount of disputed territory.)
Would Texas have ending up seeking a separate nationhood being as it was physically separated from the rest of the Confederacy? What would have been the Confederate and American response to a Texan declaration of independence from the CSA?
How would the United States have treated the territory it occupied in the south if there had been a peace treaty? Would these areas have remained under military rule? I’ll assume a civilian government would have been restored in Tennessee. But that doesn’t seem like a viable option for the smaller pieces of occupied territory.