It is ten years since my first visit to Kinotavr, the Russian national film festival held annually in the Black Sea resort of Sochi. Then, Boris Yeltsin was struggling to get re-elected, there was a widespread fear of a communist revival, and the problems facing the Russian film industry seemed irrelevant. Most films were poor and the prevailing feelings were of despair, crisis and frustration. The public was no longer buying tickets to see films, there was no money for new projects, and unemployed or underpaid actors, directors and technicians were struggling to make ends meet.

The industry had suffered a dramatic fall from grace. Its artists still remembered their prestige and status in Soviet society. Vladimir Lenin had thought of film as the most important form of art (his view that film would play less of a public role once the party had won its battle against mass illiteracy had been quietly forgotten).

Lenin's successor, Joseph Stalin, paid more attention to the work of Soviet filmmakers. He personally corrected scripts and censored their films. When officials informed him of film production targets, he responded: "Why so many? Better make fewer films, but masterpieces."

Zygmunt Dzieciolowski is a Polish journalist and writer who has reported on Russia for leading German, Swiss and Polish newspapers since 1989. He is the author of the book Planet Russia, published in Poland in 2005.

Also by Zygmunt Dzieciolowski on openDemocracy:

"Mikhail Khodorkovsky's shadow" (3 April 2006)

"Russia: racism on the rise" (26 April 2006)

"Russia’s corruption dance" (15 June 2006)

The film industry prospered under Leonid Brezhnev, with around 150 full-length feature films being made annually. The thirty-kopek cinema tickets were ridiculously cheap, and films could look forward to releases on 200,000 screens across the vast Soviet Union – from Chukotka to central Asia to the Caucasus to Lithuania.

Soviet films gained an international reputation: the Cannes Palme D'Or for Mikhail Kalatozov's 1957 Letjat zhuravli (The Cranes are Flying) was followed by an Oscar for best foreign-language film for Vladimir Menshov's 1980 Moskva slezam ne verit (Moscow doesn't believe in tears).

The post-Stalin liberalisation allowed directors such as Andrei Tarkovsky, Sergei Paradzhanov and Kira Muratova to risk making films with dissident messages. Sometimes they paid a high price – exile or imprisonment, or merely long delays in the release of their films. But their courage and determination added to the exceptionally high status of film in Soviet life.

In the eyes of the liberal intelligentsia, film was in the peculiar position of being used both by the ruling Communist Party as a propaganda tool and by "dissident" directors as a way to quietly shine a light on the moral dilemmas of totalitarian dictatorship.

After the fall

The arrival of Mikhail Gorbachev in power in 1985, accompanied by fresh discourses of glasnost and perestroika, opened a new course. The legendary fifth congress of Soviet cinema workers in 1986 heard criticism of censorship and a dramatic appeal for more artistic and political freedom; this became one of the most important events in boosting the policy of democratisation.

The old Soviet film-industry model was never likely to survive the radical economic transformation that was initiated by the disintegration of the Soviet Union. Censorship went, but so did public funding for production and distribution. Theatres across the country were transformed into furniture stores, car showrooms and casinos. The cinemas that survived were flooded with the cheapest Hollywood horror and thriller B-movies. I recall from my 1996 visit to Kinotavr that even the consumption of a massive quantity of vodka could not cheer up Russia's filmmakers and raise hopes for an industry revival in the foreseeable future.

But just as Vladimir Putin's Russia is different from Boris Yeltsin's, so times for the film industry have changed. The sense of desperation is gone. Russian film is booming on the back of the economy's rapid development, and production levels are already higher than in Britain and Germany.

Konstantin Ernst, the head of Russia's leading television channel, ORT, says that as many as 200 films are now being made in Russia. The main headaches facing filmmakers are a shortage of good scripts, talented actors, and technicians and cameramen with skills and experience. Another film producer, Igor Tolstunov, tells me about colleagues of his who are headhunting for talented students in all the country's film schools, frustrated by the number of projects that are being held up by a shortage of suitable directors.

Also in openDemocracy on Russian politics and society:

Alena Ledeneva, "How Russia really works" (16 January 2002)

The Russian film bonanza began unexpectedly around 2000, when President Putin came to power and the economy was showing signs of recovering from the financial meltdown of 1998.

It began with a dramatic growth in the number of television serials being ordered by the top national channels. Russian films then began to break audience records in the movie theatres. Producers were astonished and delighted to notice that cinemagoers were fed up with their diet of substandard American films, preferring new Russian releases with popular local stars. There was a sense of nostalgia for the great Soviet films of the past.

Russian films now account for 30% of the total box-office revenue of $350 million (in 1996 revenues stood at $6 million). "In 2000 we hardly had 350 viewers each week", the manager of a cinema in Orekhovo-Zuyevo told the authors of a book on the Russian film industry. "Four years later, in just the second half of 2004, we had 85,000."

The most successful films can generate up to $30 million in revenue, and producers can make handsome profits. 9-ya Rota (The 9th Company), a patriotic epic about the Afghan war directed by Fyodor Bondarchuk, earned $24 million and won a number of national film awards. The Nightwatch trilogy directed by Timur Bekmambetov, about a crew of vodka-swilling vampire-hunters, caught the eye of western distributors.

The future also looks promising. Growth is expected to continue, feeding a potential audience of 300 million across the entire former Soviet Union. Some film officials predict that box-office revenues may reach a billion dollars, with Russian films accounting for a third of that. Some of the massive profits earned from high oil prices have also made their way into the film industry – once again the state is financing films, offering to pay up to half of their budget.

The politics of a goldrush

The cinema boom was never going to happen without the Kremlin taking an interest. Films that promote a desired model of patriotism have been praised at the highest level. Fyodor Bondarchuk was personally received by Vladimir Putin at an exclusive reception at the president's private residence. "The Kremlin wants to be seen by the public as friends with the big stars", one film critic tells me. That is why President Putin regularly makes the effort to visit the best-known Russian actor and director, Nikita Mikhalkov. He is also keen to meet other popular actors and shower them with medals.

Russian state institutions such as the federal security service (FSB) and the ministry of defence have on occasion criticised films that appear to portray the military and its personnel in a negative light. Alexander Atanesian's Scoundrels is among those attacked for apparently distorting history in a way that the authorities objected to. These institutions can also channel funding to secure the type of film that they want. The hero of one commercial film sponsored by the FSB succeeds in preventing a major terrorist attack.

The Kremlin's general attitude towards the media makes it clear that there is a limit to the artistic freedom that filmmakers are able to practise. The directors and producers I met this year in Sochi have no illusions about this. They have all witnessed the state's clampdown on electronic media. Now, ahead of parliamentary and presidential elections scheduled for 2008, they have seen the state assume effective control of leading national newspapers such as Izvestia.

A few months ago the leading Russian film critic, Victor Matison, wrote in Novyye Izvestia newspaper about rumours of a new department that would monitor all cultural activity in the country. The most disturbing rumour was that the FSB would model the body on the notorious fifth department of the old Soviet KGB.

The perils of self-censorship

It is not only the authorities that pose a potential threat to artists. Larissa Sadilova is a young non-conformist film director who has won a string of awards at international film festivals. She has read hundreds of new scripts that have been sent by producers to the official Russian cinema agency, Goskino, seeking public funding. Larissa says she is outraged by the self-censorship of many authors, who carefully avoid subjects and issues that could provoke the anger of the authorities.

"The worst part is that the authors write as though they only want to please the officials", she tells me. In her eyes this self-censorship is far more destructive than direct pressure applied from the Kremlin.

During my visit to Sochi, the well known documentary-maker, Vitali Manski, suggested that someone might try to make a satirical film about Russian politics in what he called the "Michael Moore style". But if they did, he said, the film would stand no chance of being distributed in Russia.

"As long as a film's audience remains small the Kremlin will not pay much attention", Manski told me. "It doesn't have the resources to control what is being produced in studios all over the country anyway. But producers of popular films who want to show them on television or give them nationwide DVD distribution know that this will depend on leaving out anything that could irritate the Kremlin."

Igor Tolstunov, who doubles as the energetic producer of the Sochi festival, blames the situation on social apathy, particularly on the part of those young people who visit cinemas the most. "Would they be interested in a political movie?" he asks me before answering his own question: "I doubt it."

In Igor's view, few viewers would pay to see a film on key political issues such as the way Vladimir Putin was able to succeed Boris Yeltsin, or the murky case of the jailed oligarch Mikhail Khodorkovsky.

The Kremlin does not need the primitive tools of the Soviet years to keep the booming cinema industry under control. At present it manages without mechanisms like the cultural department of the Communist Party's central committee in the Soviet era. A more subtle carrot-and-stick approach is perfectly suitable and effective in current conditions.

Yet there are fears in the industry that a return to more active ways of controlling the film industry is possible, based on a Soviet flavour in the propaganda apparatus; television channels and the national newspapers are increasingly finding themselves in the Kremlin's grip. The film industry is not immune to similar authoritarian pressures.

As long as there are artists, there is hope. For centuries, Russian culture has learned how to play a delicate game with the government, playing by its rules, yet managing to criticise those in power. Filmmakers did this during the Soviet years, and may once again find discrete ways to say important things about their country that the Kremlin would rather left unsaid and unheard.

The author wishes to acknowledge the help of Mumin Shakirov of Radio Liberty, Moscow.