The Russian director's latest epic has bombed at the domestic box office, a victim of his close links to Vladimir Putin. Yet it is possible to be state-sanctioned and not sell out

To be truly effective, James Joyce observed, the artist requires three things: silence, exile and cunning. But James Joyce never made movies. And while cunning is almost a genetic necessity in the world of filmmaking, the pursuit of exile will see you consigned, like Ovid, to the farthest reaches of empire.

But there's also a danger in being too clubby. Case in point: Russian director Nikita Mikhalkov, who has long enjoyed a seat at the big table, thanks in no small part to his reportedly close friendship with Vladimir Putin. Unsurprising, then, that much of his recent work has been prone to grandiloquent celebrations of Russian nationalism; most notoriously, there was the queasy moment in 1998's The Barber of Siberia when he halted the film for a few minutes to depict a lavish military parade overseen by Czar Alexander III – a role essayed, with characteristic modesty, by the filmmaker himself.

When I lectured at Moscow's VGIK film school in late 2006, I was startled to find that the first question the students asked me was what I thought of Mikhalkov. Was he a good filmmaker? Was he respected outside Russia? The same question was repeated, with identical urgency, at subsequent lectures in St. Petersburg and Rostov-on-Don. Finally, talking with a group of students after a lecture, I asked why this matter was of such pressing concern: "Because we hate him," they hissed – though quietly, so as not to attract the attention of their professor.

But now "the Russian Spielberg" (as his IMDb biography claims) has come a cropper. His latest film, Burnt By the Sun 2 – a sequel to the 1994 best foreign-language film Oscar winner, soon to make its international premiere at Cannes – has flopped at the Russian box office. As Luke Harding noted this week, there appears to be a perception in Russia that Mikhalkov, these days, is less a filmmaker than an apparatchik, an instrument of the state. And his film's vision of the great patriotic war, with its noble, heroic Soviets and swinish Germans, will hardly be remembered for its even-handedness.

This has hardly hurt other productions: from Fyodor Bondarchuk's 2006 blockbuster 9th Company to Vladimir Khotinenko's 2007 costume epic 1612: A Chronicle of the Time of Troubles (financed by the oligarch Viktor Vekselberg, who also bankrolls the Moscow-based Foundation for the Support of Patriotic Cinema), there has been an ugly, triumphalist strain in Russian mainstream cinema for much of the past decade. And some of these films have fared very well at the domestic box office. But something about Mikhalkov's chummy proximity to power, combined with the pomposity of his methods, has clearly failed to strike the desired chord with the public. Worryingly, even Putin didn't attend the premiere at the Kremlin.

Back in the day, it was so much easier. Under the Communists, a fortunate few eastern bloc filmmakers enjoyed the privileges of state support: big budgets (by the standard of the day), ready resources. For some, like Hungary's Miklos Jancso, it was instrumental in shaping their aesthetic: the filmmaker today admits that his "high style" of the 1960s and 70s – those intricate tracking shots across the Hungarian plains, replete with dozens and, in the case of 1967's The Red and the White, hundreds of extras – would not have been possible with anything but the full co-operation of the state's film department.

Yet Jancso's reputation has endured, because notwithstanding their provenance, his Communist-era films were remarkable enough to outlast the regimes that sponsored them. They are elusive, ambiguous, open to many possible readings – and therefore cannot be dismissed simply as products of their time. Their politics runs second to their art. Meanwhile, other filmmakers – in lockstep with power, flattering power's vision of itself – have been forgotten.

Consider, too, the case of Giuseppe Tornatore's $35m (£23m) Baarìa, which opened last September's Venice film festival – but remains, so far, without UK distribution. Set in Sicily, and packed with Italian stars (Michele Placido, Monica Bellucci, Enrico Lo Verso), it proved an expensive, lavishly-staged disaster. Vulgar, buffoonish, grotesquely sentimental, Baarìa managed to be simultaneously salt-of-the-earth – a "people's epic" – and an encapsulation of the very aesthetic that Silvio Berlusconi has brought, for over two decades, to the nation's television screens, the mirror he has held to his country. It's a film absolutely of its time and place – and so one should not have been altogether surprised when Silvio himself proclaimed it "a masterpiece", and declared that it was the duty of every Italian to go see it, a recommendation that makes even more sense when you realise it was made by Medusa Film, his own production company.

Good filmmaking and politics are hardly irreconcilable. But the question of the film-maker's own relationship to authority is more problematic. Hou Hsiao-hsien, for years, flew the flag for Taiwan at international festivals: a state-sanctioned filmmaker in all but name. But Hou was a perennial outsider, a working-class kid in the mostly privileged world of Taiwanese cinema, and his historicism was as subtle as his technique was sophisticated; you could hardly accuse films such as A City of Sadness or Good Men, Good Women (which deal, respectively, with the 28 February 1947 massacre and the White Terror) of nationalist breast-beating; on the contrary, they are gravely beautiful, quietly profound works of art.

You can, or could, live very nicely as the flagbearer for your country. (As Derek Malcolm once observed, in this newspaper: "As the outstanding Greek director, [Theo Angelopoulos] has had his every whim granted over the last half of his career by the cultural wing of the country's government.") And I have no doubt that Mikhalkov (and Angelopoulos, for that matter) dine very well, and among notable, if not exactly distinguished, company. But they are also a handy illustration of the danger of cozying up to authority, their early talent dissolving into pomposity and self-indulgence. It's hard to keep in mind, when you're being flattered by the rich and powerful, but your true place, as an artist, is not at the table; it's outside the window, looking in.