It's based around the idea that parts of the Earth kingdom who had been being seeded with Fire Nation colonists for roughly 100 years, didn't take Zuko's rise to power very well, and proclaimed their own nations. By this point, all of Aang's friends have been killed in the liberation of former Earth colonies, and Aang himself has gone into hiding for training and over grief of his friends deaths; Zuko is the only one of the group still alive, directing the Fire Nation forces against the break away kingdoms from the throne room in the Fire Nation capital. Azula, having escaped imprisonment, took the Fire Nation loyalists to the military campaign to "1," establishing her empire. The other nations are other kingdoms fighting both the Fire Nation, and The Earth Kingdom. Azula plans to conquer kingdoms "2" "3" and "4," as a best case scenario.
Oh, there's *lots* of non-white people in the UK, but they're almost all in industrial areas of England. The BNP is a radical, fascist, neo-Nazi political party who recently had to have adjudicated against to allow non-white members. (Of course, since they support the NHS, they'd be written off as socialists in the USA.)
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