Balance-of-Payments Implications of the Break-Up of the USSR for Its Former Republics and the East European Countries

Abstract

The collapse of the Soviet Union following the unsuccessful coup of August 1991 not only brought an end to the 'Cold War', but also the demise of the Marxist system of economic management and the economic alliance between the East European countries. The former Soviet Union seemed to have used its CMEA alliance countries (Council for Mutual Economic Assistance) principally to absorb its exports of raw materials and fuels in exchange for their manufactured products, and at times, agricultural and food items (World Economic Outlook, October 1991, p. 26). Within its own borders, the Soviet Union promoted industrial production in gigantic state-owned monopolies which produced a final product for distribution across the boundaries of its republics (Stanglin et al., 1991, p. 38). As a consequence, the economies of the republics are heavily interdependent on one another, at a time when each aspires to be an independent and sovereign nation. With the break-up of the former Soviet Union and the Marxist regimes in the other CMEA countries (Bulgaria, Czechoslovakia, former East Germany, Hungary, Poland and Romania), the republics and the states not only have to restructure their domestic economic operations in line with the market economies, but also have to learn how to trade competitively in convertible currencies.