Joshua Oppenheimer: 'You celebrate mass killing so you don't have to look yourself in the mirror'

Anwar Congo is showing us how he killed people. Then he dances the cha-cha-cha. He used to beat people to death, but there was too much blood ("It smelt awful"). So he asks a pal to sit down, ties a wire to a post, wraps the other end around his neck, and pulls. "This is how to do it!"

Anwar still has nightmares about what he did. He tries to forget with alcohol, marijuana, ecstasy. He dances and sings. His friend smiles. "He's a happy man."

The year following Indonesia's 1965 coup saw the murder of more than a million "communists" (in fact, enemies of the military, including ethnic Chinese, intellectuals, union members). Anwar, head of a gang of killers called the Frog Squad, dispatched about 1,000 himself. He is the subject of The Act of Killing, a documentary that invites Anwar and his friends to dramatise their crimes, to boast about their starring roles in a genocide.

Director Joshua Oppenheimer began the film a decade ago by interviewing survivors. But when, at the suggestion of one of them, he turned his camera on the perpetrators, he found they were more than eager to reveal the history themselves. The killers simply adapted a story they had been telling each other for decades: that they were the ruling class, so their acts were heroic.

For gangsters like Anwar, Oppenheimer was offering the chance to make a "beautiful family film" – a celebration of their rise, inspired by the Hollywood movies they loved.

"They're desperately trying to run away from the reality of what they've done," says Oppenheimer, a 38-year-old Harvard graduate now based in Copenhagen. "You celebrate mass killing so you don't have to look yourself in the mirror in the morning and see a murderer. You keep your victims oppressed so that they don't challenge your story. When you put the justification – the celebration – under a microscope, you don't necessarily see a lack of remorse, but you start to see an unravelling of the killers' conscience. So what appears to be the symptom of a lack of remorse is in fact the opposite. It's a sign of their humanity."

The Act of Killing is as much Anwar's film as Oppenheimer's. The killer's taste in movies stretches from westerns to gangster thrillers to Elvis Presley musicals: apple-pie imports that were boycotted by socialist president Sukarno's coalition before the coup. The reconstructions are terrifying in their flamboyance, their bizarre camp. One scene imagines the daughter of one of Anwar's victims force-feeding him his own liver. Anwar plays himself; the daughter is played by his best friend, Herman, a portly am-dram fan dressed in a sparkling red and gold belly top, with thick eyeliner and giant headdress ("The makeup artist and costume designer loved Divine," says Oppenheimer). Herman cackles and screams as he pushes the meat into Anwar's mouth. Oppenheimer watches quietly from the sidelines, giving the gangsters all the rope they need. It's this unsettling montage of re-enactment, confessional and political exposé that grabbed the attention of doco-godfathers Werner Herzog and Errol Morris – both executive producers – as well as awestruck critics the world over.

As Anwar had nightmares about his past, so did Oppenheimer ("A family reunion transforming gradually into a scene where somebody I loved was being tortured or killed"). And after all that time with Anwar, he couldn't help but move into his world. The monster who had caused misery for thousands was the dapper gent serving him sweet tea, playing Cliff Richard records and teaching his grandchildren to care for injured animals.

It's this dissonance that makes the film so disturbing. It forces you to relate to a mass murderer.

"If we have any hope of learning how these things happen and thereby preventing them from happening again we have to discard this fantasy that there are monsters out there," says Oppenheimer, "that we just have to be vigilant and lock them up and maybe kill them or put them in camps.

"In calling someone a bad guy I reassure myself that I'm good. I elevate myself. I call it the 'Star Wars morality'. And unfortunately it underpins most of the stories we tell."

Oppenheimer stays in touch with Anwar. The two speak via Skype about once a month.

"I care about him," he says. "It's hard to call our relationship a friendship. I was trying to expose a regime of impunity on behalf of a community of survivors, while Anwar was trying to run away from his pain, to build up a cinematic psychic scar tissue around his trauma. I may not exactly like him, but I have love for him as another human being."

The Act of Killing is released on 28 June, followed by a director's tour with the extended cut.