Last week's Moscow International Film Festival marked a milestone for the Russian film industry with Oscar-winning director Nikita Mikhalkov declaring at the closing ceremony that "the crisis in Russian film is over."

Mikhalkov, who is both festival chief and Russia's best known director internationally, had good reason for his claim. This year Russia will produce nearly 100 feature films - 30 % more than last year- while flagship Mosfilm Studios is running at capacity and booked up months in advance.

But it is not only the quantity of productions that has increased. There are clear signs that the quality of Russian films is also on the rise and that the industry is regaining local and international prestige that it enjoyed up to the early 1990's - after which hundreds of cheap productions were churned out annually-many of them just vehicles to launder black market profits.

This year's festival prizes reflected the changes. Last year no Russian film was deemed worthy of competing, but this year a record three Russian films were screened in the main competition. Two of the top five prizes went to Alexander Rogozhkin's Cuckoo (pictured) which won both best director and best actor (Ville Haapasalo) as well as being awarded best film by the international critics' jury FIPRESCI.

But perhaps more significant for the Russian film industry is the fact that Cuckoo has been bought for theatrical distribution in the US by Sony Classics.

Sony has already announced plans for a major publicity campaign to back the film which tells the story of a Russian and a Finnish soldier who both fall in love with the same Lapland girl at the end of World War II. The film looks set to be a local box office hit when it is released later this summer, boosted by the publicity surrounding its festival success.

Another sign that the Russian film industry is being taken more seriously as a business and not just a cultural activity is the increasing use of the Moscow Film Festival as a launch pad for summer and autumn releases.

Unlike in previous years many of the films in the main programme have local distributors in place. Bob Rafelson's The House On Turk Street which screened in competition will be distributed by Paradise Films.

Brian De Palma's Femme Fatale which closed the festival will get a wide release by West Entertainment. Intercinema Art will release Francois Ozon's 8 Femmes domestically. All were surrounded by enough hoopla to make any Hollywood press agent proud.

Major US exhibitors are also finally moving into the Russian market. Viacom-owned exhibition giant National Amusements announced just days before the festival that it would open an 11-screen multiplex in Moscow in 2003 as the first of a string of cinemas planned with Rising Star Media, a local joint venture set up for the project.

Formula Kino a Russian joint venture between Russia's two leading exhibition outfits Karo Film and Imperial Kino opened Russia's first multiplex in May-a nine screen entertainment complex in central Moscow.

Last year the Russian box office topped $50m and it is forecast to rise again by 20%- 30% this year as more new cinemas open.