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I keep encountering this in the March On Paris scenario and I'm having a senior moment with regards to exactly what it does.

It doesn't seem to be having any effect on the beseigers strength points: does it reduce morale or readiness?

I just skimmed through the manual and didn't see anything about it.

Did I miss the section on fortresses, or is my memory playing tricks on me?

It does morale damage, not much, but will decrease the effectiveness of the unit next to the forts, and allow it to take massive losses from the nearby enemy units. On its own won't be much, and no actual strength loss will occur, AFAIK.