On the top floor of the Myanmar Traditional Artists and Artisans Association in Yangon, the organisation’s vice-president stands behind his latest creation.

It is a towering portrait of Aung San Suu Kyi, robed in pink and white, a concerned expression on her face. “If Oxford University takes down one portrait of her, we want to create 2,000 more,” says the painter, who goes by the name K Kyaw.

Days earlier he had joined dozens of others at the gallery to protest against the decision of St Hugh’s college to take down a painting of Myanmar’s leader by making their own.

The college, where Aung San Suu Kyi studied politics, philosophy and economics in the 1960s, is among several British institutions to have stripped the Nobel laureate of honours as the world reacts in shock to the brutal violence meted out against stateless Rohingya Muslims in the country she leads.

More than 600,000 Rohingya have fled the northern Rakhine state since August, trekking for days to overburdened refugee camps in Bangladesh, bringing with them stories of gang rape, indiscriminate killing and mass arson at the hands of soldiers and local Buddhists. The United Nations has said the campaign of violence is ethnic cleansing. Others call it genocide. Pressure is mounting on global leaders to act.

In Myanmar, the condemnations are being met with both indignation and pleas for patience. It has been less than two years since Aung San Suu Kyi’s National League for Democracy swept to power in a landslide election, ending half a century of junta rule.

As longtime democracy activists fear a return to international isolation and military dominance, diplomats are torn between the need to stand on the right side of history and fear that stronger rebukes, such as sanctions, will further imperil the country’s fragile democratic transition.

“The Rohingya crisis has put Myanmar’s reform process on a knife edge,” says a former senior diplomat based in the country, who like others interviewed asked to remain anonymous.

“The country and its business people are pulled in two directions: openness, and a desire for international standards, clean government and human rights – but with the attendant accountability and scrutiny – or nationalism… and a reliance on support from China. The lack of government capacity and the poorly educated population heightens the risk that the military, still the only truly functioning institution, will return, and even be welcomed in some quarters.”

For decades, Aung San Suu Kyi has been the living embodiment of Myanmar’s democratic aspirations, both inside the country and overseas. The 72-year-old, who sacrificed her freedom and family in the struggle to bring democracy to Myanmar, enjoys unparalleled adoration and has not anointed a successor. Personal attacks by Oxford and others have led to rallies being held around the country, with crowds chanting her name.

Aung San Suu Kyi at a ceremony to accept cash from private donors for development in Rakhine state. Photograph: Aung Shine Oo/AP

At an interfaith gathering attended by thousands in Yangon, many clutched photographs of the painting removed by St Hugh’s. Myanmar’s Catholic cardinal, Charles Maung Bo, one of the few public figures who has been willing to speak out for the Rohingya but who has been less vocal in recent months, took to the stage to appeal on behalf of Aung San Suu Kyi. “In her fragile hands she holds the dreams of millions,” he said.

The hope instilled in Aung San Suu Kyi – and fear of the alternative – has driven western policy towards Myanmar for years. It is why allies refused to condemn her when she did not speak out in 2012, when tens of thousands of Rohingya were driven from their homes and herded into displacement camps where they remain, five years on.

They indulged her when she failed to field a single Muslim candidate in the 2015 election, which the NLD won by a landslide. “It’s easy for people overseas to ask why she’s not doing more,” one diplomat said earlier this year. “Then the military take over and they’re like, ‘Oh, we lost Burma again!’ The consequences for her could be more severe.”

But now, with Rohingya continuing to flee daily, relations between the leader and her erstwhile allies have been at their lowest ebb. Views of the situation inside Myanmar – where the Rohingya are widely reviled as illegal immigrants and terrorists, as attacks by Rohingya militants preceded the crackdown – and outside the country are diametrically opposed.

The state counsellor has been criticised for mulling over long-term solutions while neglecting to address the immediate crisis. Both publicly and privately, she is said to have echoed army rhetoric. According to observers, she does not like to admit the military is not under her control.

The frustrations run both ways. Aung San Suu Kyi, widely characterised as intolerant of criticism, has been pushing her former allies away. UN human rights investigators have not been allowed access to Rakhine to produce a report on alleged atrocities. “There is a growing distancing,” said one diplomat in Yangon. “The UN is persona non grata.”

For months, the UN and other humanitarian agencies have been barred from the conflict area. On Friday, in what could be a sign that pressure is working, the World Food Programme said the authorities would allow them to resume food distribution in parts of northern Rakhine where thousands of Rohingya have been stranded without aid. It will be too late for many. Severe malnourishment is rife among those who have fled. “Some children are close to death by the time they make it across the border,” Unicef said.

As accounts of atrocities committed by Myanmar soldiers and local Buddhists continue to emerge from the mushrooming refugee camps in Bangladesh, there are calls for western governments to punish those responsible. Concrete action has so far been muted. The EU has suspended invitations to Europe and is reviewing “all practical defence cooperation”. The US has promised to stop inviting senior army officials to events, but is considering imposing targeted sanctions. The UN security council is working on a draft resolution on the violence that is reportedly facing strong opposition from China.

Myanmar’s transition is much more fragile than people assume, and the government’s freedom to move much narrower Sean Turnell

Those documenting the stories of survivors say there is a moral imperative to censure Myanmar. Speaking at the UN headquarters in New York on Tuesday Dr Simon Adams, executive director of the Global Centre for the Responsibility to Protect, said democracy “cannot be built on the bones of the Rohingya”.

Inside the country, rumours have swirled about tussles between the civilian government and the military over the handling of the crisis. The relationship between Aung San Suu Kyi and the commander-in-chief, Min Aung Hlaing, was already poor, diplomats say.

Days before the European Union was due to make decisions on Myanmar, an unnamed adviser claiming to speak with Aung San Suu Kyi’s authority briefed foreign reporters on the creation of a civilian-led body to distribute international aid to the Rohingya, saying that the state counsellor felt under threat of being overthrown by the army.

Senior members of the NLD have long insisted that there are military hardliners trying to undermine the transition, and the army has made intermittent pronouncements reminding the public of the constitutional clause that allows it to take back power.

The assassination in January of Ko Ni, a prominent Muslim lawyer who was advising Aung San Suu Kyi on amending that constitution, remains unsolved. Local media have reported on shadowy threats to her security. “Myanmar’s transition is much more fragile than people assume, and the government’s freedom to move much narrower than supposed as a consequence,” says Sean Turnell, an economic adviser to the state counsellor. And Myanmar has had democracy pulled out of its grasp before. In 1990 the generals annulled a massive election win by the NLD and kept Aung San Suu Kyi under house arrest.

Myat San, a former student democracy activist who spent 20 years behind bars, says the defeat persuaded her to avoid antagonising the military. “She believes only dialogue and practising peaceful efforts can solve the political crisis,” says Myat San, a confidant of the state counsellor whom he calls “the Lady”, like many in Myanmar.

“In the current situation, what the international community are doing is not supporting this government, what they are doing is putting the country back into the hands of authoritarian rule,” he says. “They are pushing the Lady and the military closer and closer.”