WARNING: this video contains violent scenes. YouTube

Video footage has emerged showing Burmese police standing by as Buddhist mobs wielding sticks and swords attack Muslims in Meikhtila – where last month more than 40 people were killed and 12,000 displaced – on the same day that the EU is expected to permanently lift all sanctions against the country.

The footage, apparently shot by police officers, shows Buddhist crowds looting and ransacking a Muslim jewellery shop, cheering when Muslims are attacked, and setting fire to mosques and houses. Later, a man who has been set alight and is believed to be Muslim can be seen lying in the road, surrounded by a crowd of people. "Pour water on him," a man in the crowd commands. "Let him die," shouts another. "No water for him."

Both Buddhist monks and police can be seen through much of the footage – the monks often taking part in the violence, the police watching immobile as it progresses.

The footage emerged on the day the EU is expected to permanently lift the remaining sanctions against Burma – which include travel restrictions on around 500 Burmese individuals, an asset freeze of 1,000 companies, and bans on EU investment in certain sectors such as timber and mining – in recognition of the country's "remarkable process of reform".

Sanctions had been suspended since April 2012, although the arms embargo remained – and is expected to remain – in place.

A series of political and economic reforms have taken place in Burma since the president, Thein Sein, took office in 2011, such as the release of some political prisoners, the opening up of its economy and the easing of media restrictions.

EU ambassadors last week agreed to permanently lift sanctions in order to "open a new chapter in [the EU's] relations with [Burma]", according to an official document seen last week by Reuters. Full ministerial approval is expected on Monday.

Yet rights groups – as well as parliamentarians for the Association of South-east Asian Nations (Asean), of which Burma is a member – say that permanently lifting sanctions would be a mistake.

They point to EU benchmarks set out last year that were to be met if the sanctions were to be lifted completely, ranging from the unconditional release of all political prisoners to recognition of the stateless Rohingya and the end of conflict in areas such as Kachin state.

"International pressure has played a considerable role in encouraging reformers within the government in [Burma] to support the democratic steps we have witnessed over the past two years," said Eva Kusuma Sundari, president of the Asean Inter-Parliamentary Myanmar Caucus. "A careful balance needs to be struck between encouragement and continued pressure. Permanently lifting EU sanctions now would be sending the wrong message."

The new video footage also corroborates claims by Human Rights Watch (HRW) that security forces in Rakhine state, western Burma, failed to protect ethnic Rohingya Muslims in June and October last year, when 200 were killed and more than 100,000 forced to flee after intercommunal violence spread through the region.

"While the state security forces in some instances intervened to prevent violence and protect fleeing Muslims, more frequently they stood aside during attacks or directly supported the assailants, committing killings and other abuses," said an HRW report released on Monday.

The failure to protect Burma's minority Muslims by the primarily Buddhist officials – and in some cases, the officials' complicity in the crimes themselves – has directly contributed to the religious violence that has since swept through the nation, from the mobs swarming the streets in Meikhtila to the anti-Muslim "969" campaign promoted by the militant Buddhist monk Wirathu, HRW's Phil Robertson told Reuters.

"What happened in [Rakhine] has helped spark radical anti-Muslim activity," Robertson said. "People are allowed to incite and instigate [violence] in a co-ordinated campaign – this is the lesson taken in by others."

The democracy icon and opposition leader Aung San Suu Kyi, who has come under repeated fire for her silence on the issue, told students at Tokyo University last week that she was "not a magician" and that "differences take a long time to sort out".

Meanwhile, the International Crisis Group will on Monday night present Thein Sein with its top award for peace – lauding his "visionary leadership to effect profound social, economic and political changes" in Burma – a move that has been derided by rights groups and analysts alike.

Pro-interfaith groups and individuals promoting peace in Burma were also targeted on Monday by a group called the Myanmar Cyber Army, which shut down a number of Facebook pages and maintains a list of pages it has attacked. On it group members have left comments including "Amazing!" and "Great! We are Myanmar [Burma]!"