It does seem in recent years that American cinema has made a spectacle out of suffering, European cinema has turned it into drama, and it's been left to the films of the Middle East to make us understand what the term really means. As members of an affluent western society, we can and do enjoy stories of violence and death played out in comic book fashion in the safe knowledge that we are watching something completely abstract from our own experience. Cinematic death can be presented as thrilling, with pain played out in melodramatic form by wealthy and well-fed actors to the strains of emotive music, touching us only as long as the scene in question requires it to do so. Things always work out, and if they don't, well you needn't worry, as it isn't real anyway. It could also be argued that, given the setting of Bahman Ghobadi's astonishing Turtles Can Fly (Lakposhtha hâm parvaz mikonand), this depressingly reflects how the different cultures view the war in Iraq – over here we watch it all on TV and may, perhaps, be morally troubled or outraged by it, but we cannot imagine, and I mean REALLY imagine, what it must be like to have this happening on our doorstep.

In a similar vein, we cannot really picture what it must be like to be a Kurdish refugee, their homeland unrecognised by the three countries in which it was historically located, forbidden to use their own language, gassed, bombed and shot by the Iraqi army, and largely ignored by Western governments. These are a displaced people whose national identity survives only through the memories and teachings of the older generation, at least those who have not been lost to war, resettlement or genocide. Many found themselves in refugee camps, sometimes within the territory they believe by right to be Kurdistan, but treated by the three national governments as outcasts and surviving with only the most basic of facilities.

It's just such a camp, one located on on the Iraq/Turkish border, that serves as the main setting for Turtles Can Fly, the first film made in Iraq since the fall of Saddam, the first Iran-Iraq co-production in living memory, and one in which every part is played by real Kurdish refugees and villagers, several of whom bear the scars of their encounters with land mines and other tools of war. With no stable electricity supply and no drinking water, conditions are poor and news of the outside world – the film begins just a few days before the American invasion – is desperately sought. Enter 13-year-old Soran, known locally as Satellite, an entrepreneurial scavenger who travels the district's remote villages hooking up old aerials and satellite dishes to receive news broadcasts, running a busy sideline in supplying and trading in other basic goods, from ropes to radios. If the film has a central character then he is it, an early indication that this story of survival in desperate circumstances will be primarily focussed on children and told almost exclusively from their viewpoint.

Satellite is like a young, Kurdish melding of General George Patton, James Garner's Scrounger from The Great Escape, and Oliver Twist's Artful Dodger, a born leader and dealer who is self-confident years beyond his actual age. His oversized glasses, mish-mash of tattered western clothing and object-adorned bicycle are like badges of authority, his troops an army of orphaned children from the camp who, with no parents or guardians to guide and look out for them, follow his orders without question. To the refugee children, Satellite represents stability, a sense of direction and perhaps even hope. He even organises them into work details to raise a few paltry coins or trade for other goods. What do they do, these sometimes infant-aged children? They dig up and defuse land mines to sell to local arms dealers, mines made by Americans and planted by Saddam Hussein's army. It's a perilous profession, as the missing hands, arms and legs on many of the children testify. And remember, the injuries on display here are all real – these are not young acting hopefuls playing at being injured refugees, they ARE them. This is an astonishingly driven, resilient and even upbeat group, personified to perfection by the impossibly energetic Pashov – one leg twisted uselessly out of shape, he hurls down muddy roads on his hand-made crutch at a speed equal to Satellite cycling at full pelt, and is almost always wide-eyed with cheerful optimism. At one point he even lifts his dangling leg up and points it jokingly like a gun at a nearby border guard, then scampers off laughing as the guards fire shots at him in response. He is the lieutenant to Satellite's resourceful captain, helping him organise his troops, seemingly popping out of nowhere at the very moment he's needed.

Satellite awaits the arrival of the Americans with enthusiasm, clearly seeing the upcoming invasion as an opportunity to progress further in his profession ("Here come American passports!" he shouts as the planes fly over). It's something he is preparing for with a handful of English phrases and words, the most important of which is simply 'Hello', a word, he informs the local arms dealer, that there is money in knowing and using. But things are about to change for Satellite with the arrival in camp of the armless Hengov (another mine victim), his young, pretty, but cheerlessly distant sister Agrin, and what everyone presumes is their small blind brother Riga. Satellite is bewitched by Agrin but is unable to get emotionally close to her or Hengov, whose clairvoyance he becomes intrigued by. It is clear that the two are carrying a dark secret, and we soon learn that Riga, far from being Agrin's brother, is actually her son, the result of multiple rape by Iraqi soldiers during a raid on her village. Hengrov loves the child, but for Agrin he is a constant reminder of her suffering that she would willingly abandon in order to leave the camp and move on.

Although I like to think I'm reasonably well versed in Iranian cinema, Turtles Can Fly repeatedly took me by surprise. Given the situation and story, the first jolt comes early on in the shape of some extraordinarily well judged character and situational humour, much of which is layered in a way that also moves the story forward, often with unfussy cinematic inventiveness. This is perfectly illustrated by the very first scene: a boy runs out of a house towards the camera and shouts, "To the left a bit!" Cut to a really funny wide shot of six or so huge TV aerials being precariously held up by members of Satellite's crew, all connected to oversized, dangling cables. As well as providing a humorous opening, it also tells us about the conditions and make-do materials of the camp and helps illustrate the camp-wide longing for information from the outside world. It's typical of Ghobadi's narrative economy that just a couple of minutes later we have been introduced to Agrin and Satellite and are fully aware of the the former's new arrival and origins and the latter's status, resourcefulness, and feelings for Agrin.

Much of the humour arises from character, and though the use of non-professional performers is common in Iranian cinema, rarely if ever have such an enigmatic and expressive group been assembled for one film. Their performances are rarely short of astonishing, with Soran Ebrahim making for a thoroughly engaging Satellite, barking orders and warnings at the top of his shrill voice, arguing with an Iranian doctor who hitches a lift in the lorry he is traveling in, and providing false translations to the village elders of a CNN broadcast of George Bush ("He says it will rain tomorrow"), but reduced to heartbreaking tears by tragic turn of events towards the film's end. As the cheery Pashov, Saddam Hossein Feysal creates a character so naturally likeable that I positively lit up every time he appeared, and as Satellite's weepy second lieutenant Shirko, Ajil Zibari has a real gift for comedic storytelling, tearfully slapping himself round the face to illustrate blows he received from another just minutes earlier. Every bit as engaging is the young Abdol Rahman Karim and the blind Riga – too young to follow acting instructions, his scenes of distress are inevitably a little discomforting, but when at one point Agrin attempts to abandon him there is an extraordinary, almost ritualistic quality to the way he attempts to make physical contact with her, a simple set of actions repeated twice that that had me quite spellbound. Yet even he gets a couple of nicely comic character moments.

The power of this humour is the way it can suddenly give way to sobering reality, a technique most effectively employed when a comical wide shot of the near invisible Satellite and his crew carrying a huge satellite disk through a crowded market cuts suddenly to a close-up of the armless Hengov silently disarming a land-mine with his mouth. It is the very matter-of-fact way such scenes unfold that make them collectively so overpowering – later in the story we are so used to Satellite's wheeling and dealing that it is only when the goods are handed over that we really contemplate the horrific absurdity of a 13-year-old boy and his even younger companions trading "Good American" land mines for two huge machine guns in a local market.

Director Ghobadi breaks with the long takes and deliberate pacing of much of recent Iranian cinema and keeps things moving at a brisk pace, but still allows for sequences of quiet and somber contemplation. He connects us with the characters and their plight in a way that is documentary-like in its realism but has all the emotional power of the finest drama. Perhaps the biggest surprise, given the low budget, is his use of real people for scenes that in bigger budgeted western dramas would be composited in the computer, creating a sense of scale that is completely absent from the recent spate of American historical dramas – whereas in Troy the sweeping shots of huge CGI-enhanced warring factions felt like the intro to a computerised war-game, the wide shot here in which hundreds of villagers run to the top of a hill to witness the arrival of American planes feels positively epic.

Turtles Can Fly is a magnificent achievement, a work that is by turns moving, bleak, warm, blackly humorous and harrowing, a beautifully realised testament to human resilience in the harshest circumstances, and a potent plea for recognition and understanding that refuses to take sides in a war on which just about everyone outside of the region has strong opinions. There is clear hatred for Saddam and celebration at his falling, but as the American troops arrive, drop simplistic leaflets and pass through the camp without even throwing the refugees a glance, there is a sense that the inhabitants will remain forgotten people, rid of their oppressor but still living in abject poverty and surviving by whatever means they can. It's a sobering conclusion to a story of considerable emotional and intellectual power, and if that means we rethink our attitudes to war and its refugees in some small way then Ghobadi will have achieved his aim.

With No DVD release on the immediate horizon and cinema space about to be handed over to the lumbering summer blockbusters, you'll have to hunt to find somewhere that is screening this film, but believe me it's worth it. I've yet to meet anyone who was not profoundly affected by seeing it, and as a bonus it might just give you pause for thought when you book your front row seats for the stylised violence of this summer's CGI killing fields.