Out of the crucible of the Syrian civil war and the discontent in Iraq’s Sunni regions, something new is emerging. The Islamic State in Iraq and Syria (ISIS) is no longer a state in name only.* It is a physical, if extra-legal, reality on the ground. Unacknowledged by the world community, ISIS has carved a de facto state in the borderlands of Syria and Iraq. Stretching in a long ellipse roughly from al-Raqqah in Syria to Fallujah in Iraq (with many other non-contiguous “islands” of control in both Iraq and Syria), this former Al Qaeda affiliate holds territory, provides limited services, dispenses a form of justice (loosely defined), most definitely has an army, and flies its own flag. The United States has reacted to this reality indecisively, with policy split in half by the official, if no longer functional, internationally recognized border between Syria and Iraq. But the reality of a de facto jihadist state is not a state of affairs that can be long tolerated.

This is an interesting evolution for ISIS. ISIS is, of course, the linear descendant of the Islamic State of Iraq, which was formed in the immediate aftermath of Abu Musab al-Zarqawi’s death and is now led by Abu Baqr al-Baghdadi. In 2006, the Islamic State of Iraq published a veritable “Federalist Papers,” titled “Informing the People about the Islamic State of Iraq.” In this document, the author, Uthman Bin Abd al-Rahman al-Tamimi, claims that the state existed despite having no contiguous territory, despite providing minimal services (“Improving their [the people’s] conditions is less important than the condition of their religion”), and despite not having a monopoly on the legitimate use of armed force—the traditional sine qua non of a state.

Al-Tamimi claimed that instead the Islamic State of Iraq was based around pseudo-feudal alliances, “pure” ideological goals, and judicial proceedings. This was a controversial position, even and especially within the jihadi movement. Foreshadowing the conflict between ISIS and Al Qaeda today, the jihadi community was deeply divided over the legitimacy and wisdom of declaring a state, not least because of confusion over whether a “state” would be accountable to Al Qaeda’s central leaders or vice versa. Drawing mostly on the Prophet Muhammad’s experience in Medina, al-Tamimi argued—primarily to a jihadi audience—that despite the jihadi state’s tangible weaknesses, it was legitimate.

The ISI was a significant entity for jihadis starting in 2006. But from a Western perspective, while al-Tamimi’s arguments were interesting, they were not particularly meaningful. It was never taken seriously other than as the nominal political wing of Al Qaeda in Iraq. Despite its internal philosophical justification, the Islamic State never held significant amounts of territory, and what little they did control was not contiguous. Further, from 2006-2008, Al Qaeda in Iraq was dangerous, but did not resemble an army. They were accomplished terrorists, spies, saboteurs, and murderers, but seldom fought as organized units using traditional military tactics. Especially after the U.S. Surge and Awakening movement defeated the ISI tactically and effectively suppressed the group, the Islamic State of Iraq’s lasting impact on the wider jihadi movement barely registered a ripple as a priority for Western policymakers.

When we fast forward to 2014, ISIS—the Islamic State of Iraq’s descendant—has taken a very different form. Without disavowing its founding documents, ISIS controls territory on a grand scale, and appears far more capable of securing it. In Syria, ISIS greatly overshadows its rival group the Al-Nusrah front, the official Al Qaeda franchise that also allies with the Free Syrian Army. And, ironically, Iraq is now without an official Al Qaeda branch, with ISIS’ only real competitors coming from the neo-Baathist JRTN and the more nationalist 1920 Revolutionary Brigade.

At its core, the most fundamental difference between Islamic State of Iraq and ISIS today is power: ISIS has a real army (indeed, as once said about the Prussians, it may be less a state with an army than an army with a state) and contains a much more robust capability to defend and expand its territory in both Iraq and Syria. Before beginning its open offensive in Anbar province in Iraq, ISIS had been fighting against the forces of the Assad regime in Syria (and their Hezbollah/Qods Force auxiliaries). It is obvious from the very sophisticated tactics displayed against the Iraqi security forces this year that ISIS learned a great deal from this traditional, if dispersed, urban combat. U.S. government officials have testified that ISIS is now equipped with heavy machine guns, anti-aircraft weapons, and .50 caliber sniper rifles. From their safe havens inside their de facto state, ISIS cadres are able to continue to recruit, train and equip their highly motivated volunteers, and push them against both the Baathist Assad regime in Syria and the elected Shi’a majority government in Iraq (where, in both cases, they also often work and fight alongside more indigenous jihadist groups).

While we have little sympathy for the Assad regime and recognize the shortcomings of the Iraqi government, the Iraqi state in which the U.S. government has invested vast resources is gravely threatened—in terms of stability, not their imminent overthrow—by the ISIS army, which seeks to further expand its territory. However, aside from U.S. interests in Iraq, there are at least three further issues generated by the de facto ISIS state.

First, ISIS’ expansion and rejection of Al Qaeda’s central leadership represents a new evolution in jihadi extremism. The near-extinction of Al Qaeda’s core—the organization constructed by Osama bin Laden and now led by Ayman al-Zawahiri—has created space for new and more extreme forms of jihadi militancy. In 1999, Abu Mus’ab al-Zarqawi challenged Osama bin Laden’s ideological direction because he considered Al Qaeda too accommodating to Shia Muslims. Fifteen years later, Zarqawi’s ideological and organizational descendants have the power to confront Al Qaeda’s leadership more thoroughly. At the core of Zarqawi’s ideology were two ideas: that commanders close to battle had ultimate political authority and that purity in the movement was paramount. In its interaction with Al Qaeda, ISIS embodies both ideas and, not surprisingly, has quite famously been expelled from Al Qaeda, ostensibly for insubordination, but perhaps also for acting like the sovereign state that is has de facto become.

Second, the existence of ISIS as a de facto state presents an incredible challenge in terms of safe haven for terrorists with transnational ambitions. While ISIS remains focused on immediate and local threats at present, it has made no secret of its longer term ambitions to strike against the United States and Europe. Its predecessors struck outside of Iraq more often than commonly acknowledged. ISIS is said to have at least hundreds of members carrying EU passports, both second and third generation children of immigrants from Islamic countries and also native European converts (see reports by the London-based ICSR on Western foreign fighters in Syria). ISIS has created a multi-ethnic army; almost a foreign legion, to secure its territory. These cadres—trained, indoctrinated, networked, equipped and funded—will doubtless present a challenge for Arab and Western security services in the coming years, all the more so if not dealt with in the very near future.

Finally, this new reality presents a challenge that rises above a mere counter-terrorism problem. ISIS no longer exists in small cells that can be neutralized by missiles or small groups of commandos. It is now a real, if nascent and unrecognized, state actor—more akin in organization and power to the Taliban of the late 1990s than Al Qaeda. Unless ISIS collapses on itself, which is a long tradition in jihadi circles but looks increasingly unlikely, neutralization of the group will require significant ground combat by someone, with the support of airpower. Such an outcome is increasingly likely as the flow of funds and recruits to ISIS continues despite conflict with Al Qaeda and other militants in Syria. To date, the geographic location of ISIS and the reticence of Western governments to be involved in the nominal territory of either Iraq or Syria (though for very different reasons for each), coupled with the weakness of both the Iraqi and Syrian armies (and the latter fighting against numerous opponents of varying alliance with the West), has prevented an effective challenge to ISIS.

And yet ISIS presents a clear and present danger to American and European interests. The group does not have safe haven within a state. It is a de facto state that is a safe haven. Arguably, ISIS presents an even more vibrant incubator for international terrorism than did pre-9/11 Afghanistan. It would be the greatest of historical ironies if just at the moment when the operation in Afghanistan to banish Al Qaeda safe havens is concluded, an even more dangerous sanctuary emerges in the deserts between Baghdad and Damascus.

* ISIS is also known as ISIL, the Islamic State in Iraq and the Levant, and is also referred to by its Arabic acronym, DAASH—all are equivalent terms for the same organization.

Dr. Douglas A. OIlivant is a Managing Partner and the Senior Vice President of Mantid International, a global consulting firm with offices in Beirut, Baghdad and Washington D.C. He is also a Senior Fellow at the New America Foundation. Follow him on Twitter at @DouglasOllivant.

Brian Fishman is a War on the Rocks Contributor and a Fellow at the New America Foundation.

Correction: This article originally erroneously listed Ansar al Islam and the Islamic Army in Iraq as active nationalist insurgent groups. The authors thank Aymenn Jawad Al-Tamimi for the correction.