Instead of wages, seamstresses at a clothing factory in Siberia accepted grocery carts to transport vegetables from their garden plots. Their bosses initially offered them coffins.

The governments of Ukraine and Moldova proposed settling their debts to the Russian Gas Monopoly in sugar and wine, knowing that Gazprom has accepted payments from others in the form of steel, turbines, gas pipes, and shares in truck and tractor companies.

In Russia's underdeveloped financial system, where bank loans, personal checks, credit cards, and other forms of credit are still in their infancy, barter deals are on the rise.

Many workers, factories, and even government departments just don't have the money to pay their bills. The situation is likely to get worse during the current economic crisis, while the rouble is losing value daily,people are having trouble getting money from banks and it's not clear who is in charge of the country's finances.

Economists and government officials say that the pervasive use of the centuries-old practice of barter is skewing the economy and preventing the development of a modern, free-market system. Barter now accounts for about half the transactions in Russian industries and 40 per cent of national tax payments.

``Barter is undoubtedly a key problem for our country,'' said Boris Fyodorov, Russia's chief tax collector, announcing plans to crack down on the practice.

Bartering isn't new to Russia it is a centuries-old practice that flourished even during the Soviet era, when Moscow bartered weapons to its allies and promised to build oil tankers if Pepsico would increase soft drink production. But that was under Communism, not the market economy Russia is trying to build now.

Companies that don't have cash can't buy new equipment or pay their bills. Workers aren't paid and taxes aren't collected --two of the biggest problems facing the Russian economy.

While some companies turn to barter because they genuinely cannot pay, others use it to hide revenue and avoid paying taxes and shareholders, said Barry Ickes, an associate Economics professor at Pennsylvania State University who studies the Russian economy.

Companies that owe overdue taxes especially like barter, Ickes said. By law, any money they receive and put in their bank account is immediately seized by tax authorities.

Companies that admit they barter say it's the only way they can collect any payment at all for their goods or services.

``Either we refuse to take any payment at all (from cash-strapped companies) or we receive some payments in goods,'' said Gennady Yezhov, a spokesman for Gazprom -- Russia's largest company and its largest tax delinquent.

Gazprom collects on an average less than 10 per cent of its payments in cash, Yezhov said. ``In a really good month, the figure rises to 17 per cent. Last month it was only 7percent.''

``Of course we would like to get cash,'' Yezhov said. ``We dream about it.... Unfortunately, it is not possible right away.''

Yezhov said bartering means extra work for Gazprom and other companies because they often don't want the goods they receive, and have to sell or trade them to someone else.

``Bartering allows inefficient companies to continue producing these unwanted goods,'' Ickes said. ``If they couldn't pay their bills in goods, they'd have to close or start producing something for which there is a demand.''

Bartering can also disguise the true value of companies and ultimately the Russian economy and allow companies to hide the details of some transactions. Bribes and other forms of corruption can continue to flourish.