Abstract. The paper examines the problems arising from the adoption of national currencies in former Soviet Republics, and advances proposals to avoid excessive trade and output contractions. The move towards national currencies in many republics -though politically unavoidable and economically efficient in the medium term-is seen as having disruptive effects on interrepublican trade in the short term, with heavy losses of incomes and employment, which add to the costs of market transition. Mutual convertibility among the new currencies could allow some of the negative consequences on trade and production to be overcome, while in the event of mutual currency inconvertibility the effects on interrepublic trade could be disastrous and only some form of payments agreement could reduce the magnitude of the contraction. An intermediate currency regime which could sustain the level of income and employment would be based on the use of the Russian rouble as a regional means of payment. Such an event, however, would require as a pre-condition the stabilization of the Russian currency.

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