The unusual rise and fall of nonmonetary trade (NMT) in the Russian transition has been a subject of heated debates. Yet, this phenomenon is often viewed as a peculiarity that one cannot explain by economic considerations alone. In this article, we show that the resort to NMT was a rational, albeit spontaneous, reaction of industrial enterprises to the outflow of liquidity, which, in turn, was precipitated by the combination of persistent budgetary deficits and strict monetary policy. The International Monetary Fun (IMF) pledge to stand by if the government became insolvent made this policy credible. Several mechanisms contributed to the development of credit