Following their blistering defeat in World War II, members of the Council seized the previously unnamed island and poured every resource at their disposal into transforming it into their revenge on the United States and the USSR. Rather than attack the nations directly, The Council wanted to goad the two superpowers into destroying each other. So they put a great emphasis on their newly-crowed island-city of Warburg into making ballistic missiles that could reach both the United States and Russia.
Unfortunately, when Arachnos assumed control of the Isles, they also took over Warburg. Rather than shut down the ICBM facilities, Lord Recluse ordered the programs to continue, so that Arachnos would gain a nuclear leverage over the world. He co-opted the Council scientists and allowed them to bring in their families. He turned Warburg into an actual living area and not just a factory for weapons.
In recent years, though Warburg became more and more militarized.
(Check out its Paragon Wiki entry for more information.)