We would establish how that fits in the world together at the character creation. (Granted, in my current world there is no iron, or knights, as the most advanced societies are still at the early bronze age, but I'm sure we could come up with something analogous that would fulfil the concept.) As with Auxol itself, my settings tend to be big and bread strokes enough that we probably could insert a whole city state, but alternative would be to choose one of the already existing ones that doesn't have much lore about it and use it instead. I assume the exact name of the nation is not what's important here.
Now what would you do if the player approached you with this concept after character generation? Or are players only allowed to author setting elements before game starts?