Russian Finance Ministry announced Wednesday that Venezuela signed a debt restructuring deal with major creditor Russia, as ratings agencies declared Caracas in partial default.
Accordingly, Venezuela will pay $3.15 billion over a 10-year period. Debt repayments would be minimal in the first six years, the ministry said.
Venezuela borrowed from Russia in late 2011 to finance the purchase of Russian arms, but failed to keep up with payments on the debt in 2016 as the South American state faced a full-blown economic and financial crisis.
The country is seeking to restructure its foreign debts, estimated at around $150 billion, after it was hit hard by tumbling oil prices and American sanctions.
The details of the deal are set to be made public at a press conference at the Venezuelan embassy attended by the country's finance minister Simon Zerpa.
S&P Global Ratings meanwhile said it had placed Venezuela's state-owned oil company PDVSA in "selective default" after it failed to make its interest payments on some of its debt.
The ratings agency this week declared the country itself in selective default after it failed to make $200 million in payments on two global bond issues.
Fitch also downgraded PDVSA and cash-strapped Venezuela over delayed payments, but Caracas insisted it was in the process of paying up.
Moscow and Caracas have been negotiating for months the terms of the deal.
Anton Tabakh, chief economist at the RAEX rating agency, said it was "normal" that Moscow was continuing to restructure Caracas's debts.
The move allows "both parties to save face and gain time, because now the issue of Venezuelan debt simply cannot be resolved, even formally," he told AFP.
Caracas has only $9.7 billion in foreign reserves and needs to pay back at least $1.47 billion in interest on various bonds by the end of the year, and then about $8 billion in 2018.
Russia and China are the two main creditors and allies of Venezuela, which owes them a total of $8 billion and $28 billion respectively.
The Chinese foreign ministry on Wednesday expressed confidence Caracas could "properly handle" its debt crisis, adding that financial cooperation was "proceeding normally".
Food and medicine shortages
In response to the downgrading from ratings agencies, Communications Minister Jorge Rodriguez said Venezuela was already catching up on the payments.
"Today, we have begun interest payments on Venezuela's foreign debt and last week, PDVSA made its debt interest payments," he said on state television Tuesday.
"We pay our debts, despite what the ratings agencies, the US Treasury, the European Union or (US President) Donald Trump say."
A committee of 15 financial firms meeting in New York meanwhile put off a decision for a third straight day on whether to declare a "Failure to Pay Credit Event" at PDVSA.
They will reconvene Thursday to determine whether holders of PDVSA debt with default insurance -- credit default swaps -- can collect payment.
PDVSA is vulnerable to creditors potentially moving to seize crude shipments or refinery assets abroad, particularly from its U.S. subsidiary Citgo.
If a selective default spreads to other bond issues, particularly the nation's sovereign debt, the South American country would likely be declared in full default.
A full default -- recognition that Venezuela is unable to repay its massive debt -- would have enormous consequences for the country, whose population is already suffering severe food and medicine shortages because of a lack of money to import them.
President Nicolas Maduro has formed a commission to restructure Venezuela's sovereign debt and PDVSA's.
But participants in a first meeting in Caracas on Monday said officials had given no concrete details on its plans.
A default can be declared by the major ratings agencies, big debt holders or the government itself.
Maduro is also under fire internationally for marginalizing the opposition, which controls the legislature, and stifling independent media.
The U.S. called an informal meeting of the UN Security Council, where US Ambassador Nikki Haley slammed Venezuela as an "increasingly violent narco-state" that poses a threat to world security.
Permanent council members Russia and China boycotted the talks.
Venezuela's envoy to the UN, Rafael Ramirez, called the meeting a "hostile" act of U.S. "interference."