Mosul dam
Mosul dam lies on the Tigris riverReuters

When militants from the Islamic State seized control of Iraq's largest dam in early August, it marked the most significant prize in their Iraq campaign to date.

The jihadists' lightning advance through northern Iraq in early June shocked the world. Iraq's second city of Mosul fell with minimal resistance and many believed the group would drive south, straight for the Iraqi capital Baghdad.

Instead, the militants sought to consolidate the victories that they had already won by grabbing strategic assets in the northern part of the country. They waged battles for the country's biggest oil refinery and successfully seized oilfields. Yet their most valuable price to date is undoubtedly the Mosul Dam.

When fighters from the Islamic State arrived at the dam, they told the workers hiding in offices that they were not in danger and would receive their salaries as usual if they kept the dam working and producing electricity for the territory they control.

Mosul dam provides electricity and water to Mosul's 1.7 million residents, who currently live under the Islamic State's rule. It is in the group's interest to keep the dam running as usual.

The dam's capacity to flood vast plains of the country has garnered much media attention. Mosul could be engulfed by a massive wave within a matter of hours, while Baghdad could even be flooded if the Islamic State militants chose to do so.

The structure itself is old and requires daily cement injections. $30m was spent on the dam by the United States when they occupied the country but the project to repair and upgrade the dam was mismanaged badly.

Reports vary on how many engineers are in place at the dam to manage its maintenance.

Indeed, the dam's current ownership is disputed in some quarters in Iraq. Kurdish forces have neither confirmed nor denied that the dam was captured by the Islamic State. The Kurds' refusal to admit its loss reveals the importance of the asset.

Controlling Mosul dam gives the Islamic State leverage with the central Iraqi government. It is central to its idea of establishing a caliphate, whereby it takes on the role of a state rather than a mere fighting force.

It has executed this tactic in eastern Syria, where it controls vast amounts of oil facilities that can generate millions of dollars in revenue. Part of this cash is reinvested in social projects in the territory it controls, as well as buying weapons and paying wages.

The Islamic State believe they are settling in for the long-run.