Less than six years ago, the West watched amazed and awed as hundreds of thousands of Burmese Buddhist monks seized the city streets in defiance of the military junta, walking through the monsoon rain in their robes, chanting the sutra of loving kindness. Undercover video-journalists filmed it all, and when the riot police and the army went in to club and shoot the monks, the same brave cameramen recorded every blow and every drop of sanctified blood that was spilt.

For Westerners sympathetic to Buddhism such as myself, there was an extra reason to be impressed, even gratified, by the monks' courage. Other religions might carry out Crusades and holy wars, glorify murderous martyrdom, debate which wars were good and which less good, call down blessings on soldiers going into battle. This, by contrast, was the religion of the Dalai Lama, who said, with reference to the Chinese who had invaded his homeland, "Your enemy can be your best teacher"; the religion whose first precept was not to kill anything; whose monks had tried to bring peace in Vietnam. The religion whose methods for calming the mind and cultivating equanimity have been refined over millennia, and which, on that account, has gained tens of thousands of adherents in the West. I reported the monks' revolt for this newspaper from southern Burma. An aged monk there gave me a string of beads which I still wear.

Less than six years later, it's hard to recapture the mood of those days. It's hard to recapture one's own lost innocence. Today, the undercover video-journalists in Burma are working for the world's Islamic media, and the footage that finds its way on to YouTube is more hideous and disturbing than anything filmed in 2007: murdered babies, blackened corpses laid out neatly on the ground, a terrified figure fleeing then clobbered and felled by a fierce blow, surrounded by men baying with bloodlust, doused in petrol and set alight; still twitching and squirming as he dies.

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This is the legacy of the eruptions of the past year: of June and October in Arakan, in the far west, then in March in Meiktila, in the centre of the country, repeated during the following weeks in towns and villages further south. No one knows whether this fire has burnt out or whether there is more to come. As I write, Burma's president, Thein Sein, a Buddhist like more than 90 per cent of his countrymen, is reported telling the nation that the Muslim minority must be protected. Yet there is no confidence that this will happen. While I was in Rangoon in the far south of the country last month, a fire broke out in a madrassa in the city centre, killing 13 boys. The authorities insisted it was caused by an exploding transformer, and arrested Muslims at the scene. Spokesmen for Muslims in the city who I spoke to insisted it was arson. No one can be sure that these events have run their course.

Nor is this some eruption of racial fury from which the Buddhist monks can stand piously apart. On the contrary, they are widely seen as bearing responsibility for the carnage. Some are even accused of taking part in the mayhem.

One of the most revered Buddhist teachers in the country, Sitagu Sayadaw, wrote in Burma's most widely read newspapers that he "deeply denounced these racial… conflicts without exceptions… Lord Buddha teaches non-violence." The nation's 500,000 monks, he went on, "should deploy the weapon of loving-kindness… to dismantle the ugly unrest". But while this is a tone we might expect to hear from a Buddhist master – even if the comparison of loving-kindness to a weapon was unfortunate – his message was drowned out by the rants of younger, strident teachers with very different ideas in mind.

The monk who has recently become internationally famous thanks to his grotesque moniker of "the Buddhist Bin Laden" is tiny, no more than 5ft tall, delicately made, with prim cupid's bow lips in his pale and unmarked face. His single name is Wirathu. I meet him in his leafy monastery in the south of Mandalay, a monastery, the New Ma Soe Yein, previously of inspirational importance during the Saffron Revolution – the 2007 anti-government protests. A turbulent, frame-shaking, game-changing place, despite its peace and tranquillity.

We sit in the sunshine and I ask him the obvious questions. Wirathu tells me he does not condone violence against Muslims, let alone advocate it. What he does advocate is shunning them: encouraging Buddhist shops and taxis and other businesses to identify themselves as Buddhist, and encouraging the Buddhist public to patronise those businesses and not those belonging to the other community.

That is a long way from dousing individuals in petrol and watching them die. But it is not totally unconnected. Both actions – the passive shunning, the active slaughter – can be placed on a spectrum of responses to the message: that community is alien, and it menaces your safety and prosperity and the very future of your race and your religion.

"Our goal is a strategic one," Wirathu tells me. "We represent Burma's 135 ethnic groups. We are urging members of those ethnic groups not to follow the Muslim religion and not to sell anything to Muslims, and that includes paddy fields and houses. The reason is that we have to protect our religion. If we trade with the Muslims, they become rich: many Muslims have grown rich and have built big houses for themselves, and mosques, and slaughterhouses, which are a problem for Buddhism. Muslims are now dominating the Burmese economy." By urging Buddhists to put stickers in their windows to identify themselves, Wirathu and his fellow zealots hope to reverse the tide.

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The paranoia seems laughable: no census has been carried out in Burma for decades, but it is believed that Muslims account for no more than 5 or 6 per cent of the population. While Muslims have been coming to Burma for centuries as traders, it was with the arrival of the British in 1824 that they first settled in the southern part of the country in large numbers. In Rangoon, the former capital which is still the commercial hub, they are just one community alongside Hindus, Chinese and Indian Christians in a rich and usually stable ethnic mix. What on earth do the Buddhists have to fear?

Yet if you travel to Arakan state, in the far west of the country, the source of these apprehensions becomes apparent. The majority of the community here is Buddhist, but they regard themselves not as Burmans, the nation's dominant ethnic group, but as Arakanese, a different race, conquered by the Burmans in the 19th century and forced to bow down to the Burman king.

While Burma as a whole fought for its independence from the British, the Arakanese fought a separate struggle – post-independence – for liberation from the Burmans. And with the partial return of democracy, they are making strides: in the 2010 general elections, the Arakan nationalists gained a majority in the state assembly. But freedom from the Burmans is only one of their demands; the other is freedom from what they regard as the menace of Islam.

Arakan has a long land border with Bangladesh. Additionally, its coastal district of Maungdaw runs parallel with Bangladesh's long, narrow Sabrang peninsula, only one hour away by sea, and the population of Maungdaw is now said to be 97 per cent Muslim.

A Muslim community called the Rohingyas is recorded as living in Arakan state since at least the 18th century, but its population has grown exponentially in recent decades. The Arakanese nationalists are riding high in Burma's fragile new democracy because they appeal to the twin fears of the local people: Burmanisation on the one hand, and Islamisation on the other.

It was in Arakan, nearly a year ago, that the latest incident of 50 years of communal violence began, after a Buddhist woman was raped and killed by three Muslims. The second bout, in October, which led to as many as 125,000 people – the great majority Muslim – being housed in camps, was also in Arakan.

A general explanation for Arakan's hostility to Islam is not hard to find. The border here is one of the world's civilisational fault lines: like the India-Pakistan frontier through the Punjab, the line between Serbia and Bosnia in the former Yugoslavia or the line between north and south Nigeria, it is one of what the influential American political scientist Samuel Huntington called "Islam's bloody borders".

Muslims and Christians have been at each other's throats for 1,300 years, but there is no love lost between Muslims and Buddhists either. No religion is more prolific in its imagery than Buddhism; none more iconoclastic, more image-hating than Islam. When the Taliban blew up the ancient Buddhas of Bamiyan in Afghanistan, we in the West denounced it as an act of heritage vandalism, but many Buddhists took it far more personally: as a declaration of intent. It reminded them that Buddhism was a great and flourishing religion in India until the invasion of Mahmud of Ghazni in the 10th century. Within a century or so, with the destruction of Nalanda University and thousands of temples, it was a fading memory, preserved mostly in Tibet.

While Buddhism may profess values such as loving-kindness and selflessness – and therefore be all the more culpably exposed when it betrays them – Islam presents itself to the Buddhists as a rigid and hermetic sect. Where the West, the "human-rights imperialists", see poverty-stricken Muslim fishermen squatting in squalid refugee camps after the Buddhists burnt down their houses, Burma's Buddhists see the thin end of an Islamic wedge which, if not halted, would expand to include Sharia law and all of Islam's other dictates.

Buddhism has a gentle, sagacious face, and as long as a Westerner takes off his shoes and socks and pays the entrance fee, he is welcome to wander around any Buddhist monument in Burma. Islam offers a sterner countenance, especially these days – and especially here on this bloody border, with militant Islamism enjoying such a boom inside Bangladesh that tens of thousands of bearded demonstrators took over the streets in recent weeks, demanding the nation become a hardcore Islamic state.

When they look not merely at what happened in India 1,000 years ago but at Islamic insurgencies in southern Thailand and the southern Philippines and at the increasingly hardline Islam of their regional neighbours, majority-Muslim Malaysia and Indonesia, not to mention Bangladesh, the Buddhists in Burma may have a point. Perhaps we owe it to them to be less patronisingly dismissive of their apprehensions. That, of course, does not mean condoning any of the hideous crimes committed in their country over the past 12 months.

The other big question these terrible events prompt regards not them, but us. All right, not us but me. Was I just terribly suckered by all this Dharma stuff, those calm smiles, the Dalai Lama's effulgent humanity, the great tide of saffron washing through the streets of Mandalay?

Maung Zarni, a veteran Burmese democracy activist and a visiting fellow at the London School of Economics, says yes. Writing in Tricycle, an American Buddhist magazine, he blamed the West for what he called "a rose-tinted Orientalist take on Buddhism", "an age-old Orientalist, de-contextualized view of what Buddhists are like: lovable, smiley, hospitable people who lead their lives mindfully and have much to offer the non-Buddhist world in the ways of fostering peace". Instead, he takes us back to the first decades of the 20th century, when Buddhism became the rallying cry of Burmese nationalists campaigning against the British Raj.

All the early rebels against British rule were monks: the root of their anger was that the British had destroyed the monarchy which held the country together. Before the British arrived, the Burmese king and the monks had a symbiotic relationship: as Ingrid Jordt, a professor of anthropology at the University of Wisconsin in Milwaukee, who spent years as a Buddhist nun in a Burmese convent, puts it: "The monks' role was to admonish the king, and the king's role was to purify the sangha [the community of monks]." With the king gone, exiled by the British, the keystone of that arch was removed, and the society fell apart.

Aung San, the father of Aung San Suu Kyi and the man who engineered Burma's independence, was free of such religious motivation, but what Maung Zarni calls "ethno-religious nationalism" was revived after independence, as the frail democracy sought ways to appear legitimate in the eyes of the people. And today, says Zarni, "the same ethno-religious nationalism that once served the Burmese independence movement has provided an environment in which… racism can flourish". k

Professor Jordt explains that the psychological background is that Theravada Buddhism – found in Burma and Sri Lanka, and regarded by its followers as "the pure teachings" of Buddha, as opposed to the supposedly impure developments in the Mahayana branches found in Japan, Korea, Tibet and Vietnam – is thought to be in peril. The Buddha supposedly predicted that his teachings, the Dharma, would remain in human memory for 5,000 years. Burmese Buddhists, says Jordt, "feel their religion is in decline in cosmological terms, and historically under threat. They are preoccupied with the fact that it is already past the 2,500-year midway mark."

In this context, she goes on, "the opening of the country to the outside world has always been viewed with dread as the moment for further decline of the religion. I have heard monks talk about military rule and how dictatorship is actually good for the religion. Under military rule, people spend their time doing only religious works and spend their holidays on picnics at [Burma's most famous pagoda] Shwedagon rather than watching movies or shopping or other modern capitalist activities. Part of the shared collective idea between military and monks is the notion that preserving the religion is of paramount concern for the people.

"One of the main ways the military has historically kept up tensions, and kept attention off their activities, has been to drum up fears about how the religion is being threatened from outside – promoting xenophobia towards the West, and targeting Muslims as the biggest threat of all to Buddhism. The cautionary tales, often told by monks, about how Muslims eradicated Buddhism in India, and the historic accounts of how monasteries and Buddhist texts were burnt and statues defiled – this is rich lore that is regularly exploited in the collective psyche."

In Jordt's view, both the recent atrocities and 2007's Saffron Revolution were motivated by the same urge: to protect Buddhism from abuse and attack. The marching monks wanted to save it from abuse by the army; the zealot Wirathu wants to save it from Islam. The monks' first protest in 2007 was a small demonstration against a steep rise in petrol prices, but their movement only began to grow after they were beaten by police and the authorities refused to apologise. "This was a protest about protecting the religion," says Jordt, "not about human-rights violations or freeing Aung San Suu Kyi. There was a component of that, but that is not what the monks were protesting en masse. They were protesting the treatment of monks and the threat to the religion. That they would now be supporting the racist policies of the government is not a surprise because it is still about the same issue – protecting the religion."

With protection of religion as their prime concern, the location of the perceived threat has shifted from the military – whom we in the West also loved to hate – to the Muslims, who are largely defenceless, and about whom our feelings are often much more complicated. But the military has not disappeared from the picture: they are now in the background, and in all probability pulling the monks' strings.

And this may well be the single most significant, and ominous, factor in these attacks. When President Thein Sein set off down the path of reform two years ago, he alienated many of the powerful generals from whose ranks he came. Most of them no longer hold office, some have retired from the army, but they are still wealthy and powerful, and deeply concerned about the rising tide of democratisation, which, if things go on as they are going now, may well lead to the election of Burma's first genuinely democratic government – perhaps headed by Aung San Suu Kyi – in 2015.

This is a matter of grave anxiety for these old men. Theirs is not the sort of cosmological angst which preoccupies the monks: we are talking wealth, property, cronies, the whole panoply of temporal power and prestige that cemented them at the top of the system for 50 years.

What would it take to bring Thein Sein's reform process grinding to a halt? If Burma were to descend into chaos – if the vicious attacks in Arakan and Meiktila were to be repeated with serious loss of life in Rangoon, and if the government were to appear helpless to stop it – these shadowy, powerful military figures could claim the perfect justification for another coup d'état, bringing reform and democracy grinding to a halt. This is the fear that haunts Burma today.

A recent investigation by Human Rights Watch revealed that the attacks on Muslim communities in Arakan last October were tightly co-ordinated, with nine being attacked on the same day. To many observers, this strongly suggests the involvement of military planners in the background. When I was in Rangoon in the weeks after Meiktila, the sense of apprehension about what might yet be to come was intense.

And Buddhism, the wisdom of the ages, the fast track to attaining mindfulness and, indeed, enlightenment, like the Buddha himself: have the events of the past year tainted it fatally?

I humbly accept that I, like many others in the West, might have been guilty of nourishing what Maung Zarni calls a decontextualised, Orientalist conception of the religion. Does it follow, though, that Buddhism can be of no use to us here, that it is futile to imagine it could sink roots and be of real benefit to people? The case is not proven. As one Western Buddhist wrote in response to Maung Zarni's article in Tricycle, "You assume that a Buddhist is a Buddha, but this is not the case. Even according to Buddhist scripture, those on the path who have not yet achieved enlightenment still have defilements." With your consent, I will continue to fold my legs.