LEIGH SALES, PRESENTER: Islamic State has had its biggest victory so far this year, taking full control of the Iraqi city of Ramadi. That's despite intensified American air strikes in recent weeks, almost a year into the US-led campaign against the murderous Islamist group. IS did sustain one blow over the weekend though; American special operations killed one of the group's leaders in Syria, a man named Abu Sayyaf.

David Kilcullen is one of the world's foremost experts on IS and he's written a new Quarterly Essay called Blood Year: Terror and the Islamic State. It's out this week. He's with me now from Washington.

David Kilcullen, let's start with the fall of Ramadi on the weekend because it goes to the heart of something that you've written about in your Quarterly Essay, which is the strategy. How is it possible that you've got the might of the US and its allies on one side, versus a bunch of murderous Islamist zealots on the other who control a patchwork quilt of land and it's the zealots who win a city like Ramadi?

DAVID KILCULLEN COUNTERINSURGENCY EXPERT: Well I think what we see here is that Islamic State has effectively adapted to the campaign that's been in place since last August. They're still doing ground manoeuvre, they are still able to defeat the Iraqi military in a straight-up conventional fight, even with international assistance in the form of air power and advisors. And I think our description of them as a bunch of murderous thugs that control a patchwork quilt of Iraq is sort of overtaken by events. I mean, they are acting like a state-building activity and they look increasingly like a state.

LEIGH SALES: Can you explain that for us a little bit more, please, because what are the things that they're doing that make them appear to be like a state?

DAVID KILCULLEN: Well, without getting too geeky about it, in international relations we normally say that a state needs to have four characteristics. It needs to control the territory, it needs to control the population, it has to have a government that exercises some form of control and it has to be capable of entering into relations with other states. So if we look at all four of those, right now, ISIS controls an area about the size of the Netherlands or Switzerland, slightly larger, about a third of both Iraq and Syria. As it's lost ground in Iraq and of course recently regained ground, it has also gained ground in Syria. It has a population under its control about the size of Israel or Norway or Singapore. It has a government that is not just military people; it has a taxation system and a court system, police, it runs electrical power, water - all those kinds of things in the cities that it controls. And then finally, it sells electricity to the Syrian Government, it trades oil and antiquities on the international market, it has an international spokesman and an international support network. So it doesn't - it's not a requirement in our understanding of what a state is that it should actually be recognised by other states and of course Islamic State is not recognised by any other state.

LEIGH SALES: Well indeed, world leaders like Barack Obama and the Australian Prime Minister Tony Abbott baulk at calling it a state. In fact they try not to use the term Islamic State. President Obama says ISIS or ISIL. Tony Abbott calls it a death cult. What do you think is the impact of refusing to acknowledge it as a state?

DAVID KILCULLEN: Oh, look, I think it's completely fine for international leaders to not want to designate Islamic State with the legitimacy that comes from recognising it as a state. My point is that if we think about it as a terrorist group, as a bunch of thugs that are going to try to blow people up, that's only part of the threat that the Islamic State poses and I think it's missing a key element of it. So whatever we say about its validity as a part of the international system, the fact is that the real danger from the Islamic State is not so much the terrorist activity, it's the fact that it is creating a massive disruption in the heart of the Middle East that has caused a longstanding cold war between Sunni and Shia groups - nations, to go hot and has the potential to go nuclear. And to my mind, that's actually the real threat that we need to be worrying about primarily from Islamic State.

LEIGH SALES: If it is behaving like a nation-building state, as you say, and it has bureaucracy and all those sorts of things, in terms of the response to it then, do we need to be engaged in a more conventional boots-on-the-ground-style campaign?

DAVID KILCULLEN: I would say conventional, but not necessarily boots on the ground. So if it is a state and it has an aggressive agenda and its main risk is that it's disrupting the region, what that means is that we need to deal with those elements of it that make it more than just a bunch of terrorists, that make it more like a state. So its control of territory, its ability to govern a population. And I think that does impose not a counterterrorism or a counterinsurgency campaign, but a straight-up conventional fight. Now that doesn't mean necessarily troops on the ground. We could do a very significantly increased level of activity without going anywhere near putting combat troops on the ground. And one of the points that I make in the essay is that if you look at the average rate of international air strikes since last August into Syria and Iraq, it's about 10 per day. If you compare that to Libya in 2011, it was 45 per day. In Afghanistan in 2001, it was 83 per day. And in the Kosovo campaign, which people may remember from 1999, was 250 per day. So without even going close to putting troops on the ground, we could be doing a very significantly greater amount to deal with the Islamic State. What's limiting us is rules of engagement and the way that we haven't been able to put what are called JTAGS, sort of observers for air strikes, forward on the ground.

LEIGH SALES: If you were to make those rules of engagement less restrictive, would it increase the risk of fatalities and therefore be harder to win public support at home for that type of mission?

DAVID KILCULLEN: Yes. That's exactly what it would require. But I think that people have to recognise that we're not looking primarily at something that's like al-Qaeda. We're looking at something that is massively disruptive and is generating already a military intervention in the region. It's just that right now, that military intervention is aggressively led by Iran and it's drawing in the Saudis, the Turks, the Israelis and others. And so the choice is not between some kind of increased Western level of activity and no intervention. The choice is between an intervention that's led and approved by the international community and carried out in accordance with international norms versus one that is turning a cold war hot and could potentially go nuclear. And I think that's the frame within which we need to be thinking about it. So yes, undeniably, it would increase the risk, but I think that there's a difference between a short-term engagement like Kosovo or Libya and the possibility of a massive disruption to the Middle East, North Africa, the internet, the global economic system, the global transportation system, that would come from the kind of conflict that's developing now.

LEIGH SALES: Almost every time you're on the program we talk about events that go back to 9/11. We've been in the War on Terror, as it used to be called, ever since then. Briefly - and I know this is hard to answer briefly - are we ever going to go back to some sort of pre-9/11 normal?

LEIGH SALES: No, and I make that point in the essay: that there's this fantasy out there that if we just kill enough terrorist leaders, that we can all go back to normal. This is the new normal. This level of persistent conflict is in fact the norm and we need to be dealing with that. I think there is some good pictures, good elements to the picture. One of them is the reduction in terrorist attacks on the West. If you think about 9/11, 2,996 people killed, about 6,000 injured, and then in the three or four years after that, about another 500 people killed, another 3,000 injured in places like Bali, Madrid and the London bombings. If you look at all the attacks over the last six years, so Sydney, Ottawa, the Boston bombing, the Fort Hood attack, Copenhagen, Paris, the total number of Westerners killed in all those attacks is only 50. And if you count the perpetrators, it's only 54. So, we've significantly reduced the national-level threat. It's obviously tragic and extraordinarily terrible for the individuals or the families involved and we need to be dealing with that as a police matter and an intelligence matter, but it's nowhere anywhere close to the scale of what we saw during and immediately after 9/11. So we've actually succeeded in reducing significantly the global level threat of groups like al-Qaeda. Unfortunately, the way that we've done that through the invasion of Iraq and other things that we've talked about many times before has created this new level of threat and it's a different kind of threat that we need to be thinking about now.

LEIGH SALES: There is always so much more to talk about, but we're out of time, unfortunately. Thank you very much, David Kilcullen.

LEIGH SALES: No worries. Thank you for having me.