MOSCOW (Reuters) - Russia hit its foreign currency borrowing target for 2012 when it drew strong demand for $7 billion in Eurobonds on Wednesday, in the biggest hard currency denominated issue from an emerging market country since 2000.

Russia was able to sell at the bottom of its previously-announced yield guidance to investors who are currently attracted by the country's strong oil earnings.

"The Eurobond placement could be considered as a real success," said Nikolai Podguzov, head of fixed income research at VTB Capital.

"The pricing was tightened throughout the course of the placement, and demand was shifted towards longer-term securities, which highlights the reasonably strong confidence of global investors in Russian risk."

Andrei Solovyov, head of debt capital markets at VTB Capital, one of the organizers, said the 30-year bond would carry a 5.625 percent coupon for a 5.798 percent yield to maturity under final pricing.

The coupon on the five-year tranche was set at 3.25 percent for a yield to maturity of 3.325 percent and the 10-year paper would carry a coupon of 4.5 percent with a yield to maturity of 4.591 percent, Solovyov said.

A $3-billion 30-year Eurobond was sold at 250 basis points over U.S. Treasuries, $2 billion 10-year paper at plus 240 basis points and $2 billion 5-year Eurobond at 230 basis points over Treasuries, a financial market source said.

On Tuesday, sources told Reuters that the Finance Ministry planned to issue the 30-year paper at 250-255 basis points over U.S. Treasuries, the 10-year paper at 240-245 basis points over Treasuries and the five-year Eurobond at plus 230-235 basis points [ID:nL6E8ES0JU].

Strong investor appetite is also indicated by the large size of the issue, which means that Russia has been able to meet its entire $7 billion international borrowing target for the year.

"Investors with free money, who don't want to invest them in risky (west) European bonds, are ready to invest in Russian ones," said Arkady Dvorkovich, the Kremlin's chief economic advisor, speaking to journalists in Delhi where he is attending a summit of the BRICS nations.

"This opens up possibilities for other corporate borrowers, undoubtedly, especially given such a market reaction," said Vladimir Dmitriev, the chairman of Russia's state development bank Vnesheconombank (VEB), at the BRICS summit.

"There is interest and a good appetite."

GENEROUS YIELD

The final yield was still generous, in contrast to Russia's previous dollar Eurobond issue in 2010 that was subsequently criticized for over-aggressive pricing, and looked attractive compared with similar emerging market credits, analysts said.

"They are paying to get the size away," said a bond trader in London.

The spreads on the newly-issued bonds, between 230-250 basis points over U.S. Treasuries, represented a small discount to Russia's existing Eurobond curve, which traded between 250 and 280 basis points over.

"Our view is that relative to peers the bonds are cheap. Given the strength of the economy and the low indebtedness of the sovereign it certainly makes sense to invest," said Werner Gey van Pittius, portfolio manager at Investec Asset Management in London, an emerging bond fund that invested in the issue.

Van Pittius noted that Russia's government debt is only around 10 percent of gross domestic product, of which just 3 percent is foreign debt, indicating miniscule credit risk.

The spread on 10-year South African Eurobonds, 180 basis points over U.S. Treasuries, is some 60 basis points below the spread on the new 10-year Russian bonds, a larger gap than he believed was warranted by Russia's slightly lower rating of BBB compared with South Africa's BBB+.

"The spread relative to rating is too wide at the moment," Van Pittius said.

The yield premium on the 30-year paper is around 105 basis points over similarly rated Mexico and 125 basis points over Brazil, a gap that many traders see narrowing on expected Russian outperformance.

The banks running the deal are VTB , Sberbank , Citi , Deutsche and BNP Paribas .

According to Thomson Reuters data, the deal is the largest by an emerging markets sovereign since 2000.

(Writing by Jason Bush; Additional reporting by Lidia Kelly in Moscow, and Alexei Anishchuk in Delhi; Editing by Douglas Busvine and Ron Askew)