(Adds finance minister statement in the paragraphs 6 and 7)
MOSCOW, March 16 (Reuters) - Russia tapped the global Eurobond market on Friday and set yields below initial guidance, indicating demand for the paper remains strong despite escalating tensions with the West.
Russia raised $4 billion in two Eurobond issues that were a test for the appetite of global investors for Russian assets amid geopolitical instability.
The finance ministry said it would swap new Eurobonds worth $3.2 billion for existing Eurobonds maturing in 2030 in an effort to bring down its debt-servicing costs.
Relations between Britain and Russia have crashed to a post-Cold War low over an attack on a former Russian spy for the West and his daughter in Britain on March 4.
Britain has pointed a finger at Moscow for the attack but Russia denies involvement.
Russian Finance Minister Anton Siluanov said in a emailed statement that high demand from the international investors "despite not the most favourable for Russia news background" confirmed that Russia was capable of raising long-term debt.
"We reserve the right to enter the international capital markets in the course of the year with debt instruments of various terms or, possibly, currencies", he said.
The finance ministry said it raised $1.5 billion worth of a Eurobond maturing in 2029 and $2.5 billion worth of a top-up Eurobond maturing in 2047 that is already in circulation.
Andrey Solovyev, global head of debt and capital market at state-run bank VTB Capital, which ran the placement, said in a statement that British investors bought 49 percent of the 2047 Eurobond with 20 percent bought by U.S. buyers and 13 percent by Russian investors.
He also said 35 percent of the 2029 Eurobond was bought by Russians while 34 percent was sold to U.S. buyers and 22 percent to British investors. The debt was bought by 170 investors.
VTB said five percent of both issues was sold "within the framework of the capital amnesty". Last year President Vladimir Putin ordered that Eurobonds be offered to help Russians holding capital abroad bring their money home.
The finance ministry has promised to give preference to Russians when selling sovereign Eurobonds.
Wealthy Russians facing the prospect of targeted U.S. sanctions had floated the idea of a special treasury bond to help create favourable conditions for them to bring their cash home.
Unlike with bank accounts, future holders of Eurobonds do not have to identify themselves to the Russian government so can remain anonymous.
The finance ministry said yield guidance for the 2047 Eurobond was set at 5.25 percent, below the initial guidance of 5.5 percent. Yield guidance for the 2029 Eurobond was set at 4.625 percent, also below the initially announced guidance of 4.75 percent.
VTB said the final demand amounted $7.5 billion, reflecting yields moving in the opposite direction from bond prices.
Demand for Russian Eurobonds could have been spurred by S&P Global's recent credit rating upgrade for Russia ahead of the March 18 presidential election that Putin is set to win easily. (Reporting by Andrey Ostroukh and Darya Korsunskaya, writing by Denis Pinchuk, Editing by Matthew Mpoke Bigg, Editing by William Maclean)