Both versions are intelligible; however, it is the second one that makes more sense for the information in this sentence.
He participated in one of the most challenging swimming competitions SwimFest-X in
countryname-Y, which facilitated his success in Z.
In this first version, the comma is used to separate an independent clause from a dependent clause.
The independent clause is, "He participated in one of the most challenging swimming competitions SwimFest-X in countryname-Y." This clause is independent because it has its own subject ("he") and verb ("participated"), and is a complete thought. Therefore, it can stand alone as a sentence.
The dependent clause is, "which facilitated his success in Z." While this clause does contain its own subject and verb -- with "which" acting as the subject (and pronoun) and "facilitated" being the verb -- it does not form a complete thought. The word "which" refers to the the swimming competitions mentioned in the previous clause, but you cannot tell what "which" means by the dependent clause alone. It is in this way that the clause does not form a complete thought, thus rendering it dependent.
He participated in one of the most challenging swimming competitions, SwimFest-X in
countryname-Y, which facilitated his success in Z.
The second version you have included is more like a main sentence with a dependent clause sandwiched in the middle. The main sentence is, "He participated in one of the most challenging swimming competitions which facilitated his success in Z." The dependent clause in the middle is, "SwimFest-X in countryname-Y." To have this information sectioned off with commas, as you do in this example, means that you can completely remove the phrase from the sentence and it still make sense. (This happens where I typed the main sentence previously.) Separating the information with commas is similar to separating it with parentheses or dashes. Generally, you can pull this information out without decreasing coherency, since it is used to elaborate on the main information of the sentence.
For your specific case, since "SwimFest-X in countryname-Y" is elaborating the object of the sentence ("swimming competitions"), the second version makes more sense; elaborating information can be set apart with punctuation to show that it is an additional descriptor, unnecessary for understanding the whole sentence.