Vladimir Putin put Russian troops into Ukraine's Crimea region and is facing the threat of US and EU trade sanctions because of it Reuters

A financial product that insures investors against Russia's government defaulting on its debt has spiked in price amid high demand for protection.

Russia is facing economic sanctions from the West because of its involvement in the Ukraine crisis, something that could seriously harm its fragile economy.

The rate attached to five-year credit default swaps for Russia rose 11 basis points on 12 March, nearing 248bps.

Moreover, Russia's dollar-denominated sovereign debt, due for maturity in 2043, dropped by 1.4 points to 94.255 – the lowest ebb from its September 2013 issue.

A CDS works by the seller of the contract offering to pay the buyer in the event of a default. The buyer pays a pre-agreed rate over a certain period for the CDS, which is often used by the buyer as insurance to hedge against the risk of an investment elswhere.

For example, investors in Russian debt may take out a Russia CDS to protect themselves against default.

Russian President Vladimir Putin has deployed troops in the Crimea region of Ukraine, a move heavily criticised across the world.

The US and European Union (EU) has placed visa restrictions on Russia and have touted the possibility of trade sanctions. Russia exports a significant amount of gas to the EU.

Russia says it has put troops into Ukraine to maintain stability and protect its interests amid the instability of revolution. Crimea's population is around 60% ethnically Russian and the country owns a large amount of industry there.

But the US Secretary of State John Kerry accused Russia of an "incredible act of aggression" and said it was breaching Ukraine's national sovereignty.

A revolution in Ukraine ousted the country's pro-Kremlin President Viktor Yanukovich. Many Ukrainians want closer ties with the West – the EU in particular – but thought Yanukovich was dragging the country closer to Russia.