By Michael Axworthy

Penguin, £9.99

WHENEVER I give a book a good review, it is in the hope that you, the reader, will choose to buy the book and similarly enjoy it. While reading Michael Axworthy's exceptionally lucid, intriguing and informative history of Iran, I had a slightly different wish: I really hope that someone gives Barack Obama – a man known to turn to the library rather more than his predecessor – this book for Christmas. Without rose-glasses or narrowed eyes, without being an apologist or a zealot opponent, Axworthy presents a history by turns thrilling, cautionary, inspiring and surprising.

The crux of the book is the two names for that area between the Caspian and the Arabian Sea, which has been associated with both the Cradle of Civilisation and the Axis of Evil. Iran, in the popular imagination, is a desert of theocratic hawks, burning effigies and stoned adulteresses. Persia, on the other hand, conjures images of elegant poets reclining on petal-strewn carpets reciting ghazals about nightingales to their mistresses. But Iran and Persia are one and the same country.

Iran is what the inhabitants always called their country – and the word is cognate with Aryan. Their language, though written in Arabic script, is as Indo-European as Portuguese, Gaelic or Russian. Persia is what we usually called it, most famously in the play by Aeschylus which premiered in 472BC and set the paradigm for the clash of Civilised West against Despotic East. In 1935, Reza Shah ordered that all official communications should change Persia to Iran, to distance the country from the prior Qajar Monarchy.

Reza Shah embodies many of the book's ironies. Denounced as both a British stooge and a Hitler sympathiser, a soldier who founded a dynasty because he failed to establish a republic, he, like many other Iranian leaders, had to dance some very fine lines between religion and politics, modernity and tradition, the nationalism of his homeland and the Dar al-Islam of a wider, fractured faith. Like many, he failed.

Axworthy provides concise and precise descriptions of the differences and grievances between Shi'ism and Sunni Islam, as well as sketching Sufism and the modern Baha'i faith. The role of popular religious movements, often aligned to socially disadvantaged groups – the heresy of Mani, the Mazdakite Rebellion – has left an indelible mark on the development of Iranian politics. Although religion is intertwined throughout the story, Axworthy points out that only 1.4% of the population attend Friday prayers.

He has an infectious fondness for the literature, from Ferdowsi to Sadeq Hedayat (though no Marjane Satrapi and only polite nods at Iranian cinema), and cannily shows how the fads for certain Persian writers – Hafiz in the 18th century, Omar Khayyam in the 19th and Rumi in the 20th – often provide a mirror to European preconceptions.

The story of Persia pre-dates Islam. At school, the first history I was taught was the Athenian League against the Persian Empire of Xerxes: it was like Star Wars with arrows. What we weren't told was that the Persian prophet Zoroaster had introduced the idea of a monotheism linked to moral rectitude to the world, or that Xerxes' predecessor Cyrus had restored the Israelites to Jerusalem. Christianity probably owes more to Tehran than Athens.

The genius of Persia is revealed through conquest. Whenever the rulers in Persia changed, the bureaucracy remained intact. The real problem for Iran was its position in the "Great Game", when by turns Britain, France, Russia, Germany and the United States required its strategic compliance in wider geopolitical issues. Iran was no longer important in itself, it was important for tactical reasons. It's no wonder that the combination of expedient intervention and laissez-faire hauteur created a climate of resentment against the foreign powers.

It is against this backdrop that figures such as the Ayatollah Khomeini and Mahmud Ahmadinejad are best understood. Iran once turned to the US, as a fellow fledgling democracy, to act as an "honest broker" with the rapacious West. In September 2001 there were candlelit vigils in Tehran and forthright denunciation of suicide terrorists by both Prime Minister Khatami and Supreme Leader Khamenei. It is an odd prelude to the sabre-rattling that has commenced from both sides since.