I think that the Variags were a race or tribe of people. Perhaps other peoples also lived in Khand. It would not be unlike Germany in Roman times...you had the Teutons, Osgtrogoths, Visigoths, Gauls etc.
The Variags were just a fierce group of people from Khand who went to war for Sauron.
I always imagined Khand to be a place similar to India perhaps.
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