Disclaimer: This is just an opinion from the Satmar Rav. There are others that feel different about this, but please don't judge if this answer does not suit you. This is the accepted among Satmar-Jews, and I am just trying to share that view.
According to the teachings of the Satmar Rav, in different places, this means that the State is preventing the redemption, because the government does not, whatsoever, uphold the Torah and mitzvos. Refer to Siman 69 in Vayoel Moshe.
וז"ל הרמב"ם ז"ל באגרת תימן: שכשיחשבו העכו"ם שאומה זו לא יהי' לה ממשלה לעולם ולא יגאלו מן השעבוד בו, וכל החכמים כולם פה אחד בעצה זאת, אז יגלה המשיח. ומבואר גם בגמרא סנהדרין דף צ"ח ע"א אין בן דוד בא עד שתכלה מלכות הזלה מישראל, ופירש"י ז"ל שלא תהא להם שום שלטנות לישראל אפילו שלטנות קלה ודלה. וא"כ אותה מלכות הזלה שקודם מלכות בית דוד מעכבת ביאת בן דוד. ומה שנמצא באיזה מקומות מעטים רמז על עזרת האומות גם זה קאי על אחר ביאת המשיח. שעכשיו לא נוכל לידע הטעמים וסיבות הדברים איך שיהי', עד שיבוא מלך המשיח ויאר עינינו. גם דברי הרד"ק שבסוף תהלים הם כעין דברי הרמב"ן שכתב כל יסוד דבריו מהכתוב שבישעי' ס"ו כתב על אותו הקרא שזה יהי' אחר הפלא הגדול שיראו הכל במלחמת גוג ומגוג, וע"כ דקאי על אחר ביאת המשיח. גם סיים הרד"ק שזה יהי' לפי שבטחו ישראל בגלות בקל יתברך לבדו, א"כ תלה הדבר במה שיבטחו בהשי"ת לבדו, לא בפעולה
The Rebbe quotes, in the beginning of this siman, the Rambam in his Iggeres Teiman, the letter to the Yemenite Jews. He writes:
The sages, of blessed memory, frequently allude to persecutions in the following manner: "once the wicked government passed the following decree of persecution," or, "they decreed so and so." After a while G-d would make the decree null and void by destroying the power which issued it.
From this, and based on the Gemara you quoted, the Rebbe explains that this means that in order for Moshiach to come, the State of Israel, which is no by no means a Torah-state, must lose its powers.
In the translated hakdama to Vayoel Moshe, it writes:
I have also quoted 75the words of the Gemara in Sanhedrin 98a: “The son of Dovid will not come until the lowly kingdom departs from Israel.” Rashi explains: “Until Israel has no form of government, even an unimportant and weak one.”76 So we see that before the coming of moshiach that lowly state will disappear, since his coming is impossible otherwise, and the state is delaying the true redemption. And a similar thing is explicit in the words of the Rambam in Igeres Teiman. 77But we need Heavenly mercy so that that state should come to an end only through power from above, from Hashem, not through the nations, because if it happens through the nations, Heaven forbid, it would obviously be a tremendous danger to the Jewish people. May Hashem have mercy on us and all of His people Israel.78
Refer to here: https://www.truetorahjews.org/qanda/adshetichleh
Refer also the Peninei Rabbeinu HaGriz (p. 148), where it says that even if the president would be Reb Chaim Ozer, it would not be allowed to have a State before the coming of Moshiach. Refer to Efes Biltecha Goaleinu (p. 303), where the Rambam is quoted and it explains that only after the coming of Moshiach, there will be a Government in Eretz Yisrael. And thus, says the Rebbe, the State that is now ruling, must make way.
He will cut the branches with pruning shears” (Yeshayahu 18:5) - This posuk, which the Satmar Rebbe quotes in the hakdama, but also in siman 68, has a lot of meforshim that say it refers to the power of the nations. See also the Targum there. But the Rebbe offers another insight. Refer to the siman.
This seems also be the language of Rabbi Yisroel of Shklov, in his work פאת השלחן (Hilchos Eretz Yisrael, Chapter 1:3). He says that restoring the Jewish kingdom would be not allowed.
In another footnote, the translator of Vayoel Moshe hakdama, writes:
“When the gentiles think that this people will never have their own government and state, and they will never be redeemed from their exile, and all the sages of the world say this unanimously, including the sorcerers and those who understand the powers, Hashem will annul their thoughts and their false logic, and then moshiach will be revealed. This is what Yishaya (44:25-26) said, ‘Who frustrates the signs of imposters, and diviners He makes mad; He turns the wise backwards, and makes their knowledge foolish. He fulfills the word of His servant, and the counsel of His messenger He completes; Who says of Jerusalem, “It shall be settled,” and of the cities of Judah, “They shall be built, and its ruins I will erect.”’ That is the correct belief that Jews should hold.”
Edit: This Shabbos, I was reading the Yalkut Biurim section of the Oz VeHadar Gemara in Sanhedrin. There, on page 105, it explains the Gemara. It says that it refers to the kingdom that is in Yisrael, that is by no means a Torah driven kingdom. Not even the 7 Noahide laws. And that is why, according to that explanation, the kingdom must be removed in order for Moshiach to come. The Yalkut Biurim refers to this as the "unworthy leaders", e.g. leaders that drive people away from Torah.
Footnotes:
75 Siman 68
76 The Gemara cites a verse in support of this: “He will cut the
branches with pruning shears” (Yishaya 18:5). Rashi on Yishaya, as
well as the Targum and the Radak, say that it means Hashem will cut
down the non-Jewish nations. Accordingly, the Gemara would mean, “The
son of Dovid will not come until the lowly non-Jewish kingdom is no
longer in power over Israel.” But Rashi on the Gemara clearly
interprets it to mean that the Jews will not have a kingdom. Possibly
Rashi on Yishaya represents an alternative interpretation of the
Gemara, or perhaps Rashi held that although this is the simple meaning
of the verse, the Gemara could not have understood it that way,
because if so the Gemara would be saying that before moshiach the Jews
will be free from non-Jewish rule, which would contradict the
principle that "there is no difference between this world and the days
of moshiach except for the subjugation of the nations" (Shabbos 63a).
77 “When the gentiles think that this people will never have their own
government and state, and they will never be redeemed from their
exile, and all the sages of the world say this unanimously, including
the sorcerers and those who understand the powers, Hashem will annul
their thoughts and their false logic, and then moshiach will be
revealed. This is what Yishaya (44:25-26) said, ‘Who frustrates the
signs of imposters, and diviners He makes mad; He turns the wise
backwards, and makes their knowledge foolish. He fulfills the word of
His servant, and the counsel of His messenger He completes; Who says
of Jerusalem, “It shall be settled,” and of the cities of Judah, “They
shall be built, and its ruins I will erect.”’ That is the correct
belief that Jews should hold.”
