Russia is facing effective bankruptcy as soon as Wednesday after the World Bank warned that crippling sanctions have left the Kremlin “mighty close” to a default on its foreign debts.

Carmen Reinhart, chief economist at the World Bank, said that Russia and Belarus are now in “square default territory”, with payments on about $40bn of Moscow’s external bonds at risk.

Analysts fear the country will fail to make a $117m (£89m) coupon payment on a sovereign eurobond next week. It will have a 30-day grace period to pay up, but may be deemed to have defaulted if it attempts to pay in roubles.

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Foreign investors hold about half of Russia’s currency-linked bonds, leaving banks that bought debt from Moscow potentially exposed to multi-billion-dollar losses as a result. France is most at risk, with $4.5bn of Russian government bonds held by the country’s lenders.

Read more: The Telegraph