The future of state funding in Russia for international co-productions is unclear after a major shake-up in state support for film was ordered by the Kremlin.

The functions of the Russian Cinema Fund, set up in 2009 with an annual budget of around $170 million, to channel government support to a key group of major production companies, increase opportunities for international co-production and promote Russian films overseas, are to be taken over by the culture ministry.

The sudden change was announced Thursday after a meeting chaired by deputy prime minister Vladislav Surkov — a former Putin chief of staff and widely considered the Kremlin’s main ideologue.

The move comes just as the system was beginning to find favor with producers across Europe keen on making movies with Russian partners, and it was met with dismay within the Russian film industry.

“The fund as it functioned in the past two years will no longer exist. It is all really bad,” one Moscow-based producer who has been involved in a range of European co-productions, told Variety, adding that he feared international activities of the fund will be dismantled.

Surkov said Thursday that the changes — which bring the hitherto semi-autonomous fund fully under the control of the Ministry of Culture — are designed to optimize public spending on film and increase exposure for Russian films at the domestic box office. In the future the Cinema Fund will focus on supporting commercial cinema, with other films financed jointly with the culture ministry.But comments made before Thursday’s announcement by Vladimir Medinsky, Russia’s minister of culture, suggest that co-production coin may be a victim of the new system.

Medinsky insisted that Russian state money should go to approved projects and that coin should be spent within Russia.

“If a film is a commercial product, you can make whatever film you want — we do not have censorship,” Medinsky told Variety.

“If you want money from the state we have to know what is in that film, what it is about.”

The changes — details of which are expected to be made public in December, also throw into question co-production and co-development agreements established between Russia, France, Germany and Italy in the past two years.

“For us and all other foreigners it is very important to have a reliable partner in Russia. And this was the Cinema Fund, so now there are a lot of questions for us,” said Simone Baumann, a Leipzig, Germany-based producer who represents German Films, the German film promotion body that also supports co-productions, in Eastern Europe.

Although differences in approach and attitude between the Ministry of Culture — which for the past three years has been responsible for funding films deemed of national or social importance — and the Cinema Fund had been evident for a while, many were surprised by the speed with which the decision was made.

Rumors that culture minister Vladimir Medinsky — appointed by President Vladimir Putin in May — was moving to wrest control of the money and resources wielded by the Cinema Fund began circulating in mid-November.

Producers and directors with projects that had been greenlit for funding suddenly found bank transfers on hold and their calls going unanswered.

Sergey Tolstikov, a former businessman who spent five years working in Los Angeles before being brought into head the fund, was said to have incurred Medinsky’s wrath after refusing to fund ideologically slanted projects, including one featuring a love story set in the Winter Olympics 2014 village currently under construction in Sochi, southern Russia.

“Surkov is behind all the changes, and he is planning to take full control of state-funded film production in Russia,” one Moscow industry insider told Variety.

“Surkov and Medinsky are very much in favor of quotas for Russian films, and Tolstikov strongly opposed that. They want to produce big ‘patriotic’ films and are paranoid that big bad Hollywood won’t give them space in theaters without quotas.”

At last week’s meeting where the decision to introduce the changes in January was unveiled, the lack of theatrical success for Russian films was highlighted.

Surkov said that millions of dollars have been spent on publicly financed films but the share of Russian box office among the major Russian production companies, which share a fixed annual pot of funding worth $60 million, has fallen from 8.7% in 2010 to 7.5% this year.

It was unclear whether Tolstikov would remain head of the Cinema Fund after a request for comment went unanswered.