MINSK (Reuters) - The chief executive of Russian potash producer Uralkali has been moved from jail to house arrest in Belarus, signalling that a diplomatic spat over the collapse of a sales cartel could be nearing an end.

Vladislav Baumgertner was detained while visiting Belarus on August 26, about a month after Uralkali withdrew from a marketing alliance with state-owned miner Belaruskali, an important source of income for Belarus.

He has been held in a KGB prison in Minsk for a month and could face up to 10 years in jail on charges of abuse of office.

"He was transferred to house arrest yesterday," Dmitry Goryachko, Baumgertner's lawyer, told Reuters.

Russia said last week it expected Belarus to hand over Baumgertner soon, and the development came after the country's presidents and prime ministers discussed his arrest at separate meetings this week.

Russian President Vladimir Putin was due to meet his Belarussian counterpart Alexander Lukashenko again on Thursday when the allies hold joint military manoeuvres in Kaliningrad, a Russian outpost between Poland and Lithuania.

Lukashenko has said he is ready to repatriate Baumgertner, but wants a change of ownership in Uralkali that would restore strong commercial links between Belarus and Moscow.

Russian billionaire Mikhail Prokhorov's investment vehicle Onexim joined a list of potential bidders for a stake in Uralkali after China's sovereign wealth fund, China Investment Corp, acquired a 12.5 percent stake on Tuesday.

Tycoon Suleiman Kerimov and his partners own 33 percent of Uralkali, the leading producer of the fertiliser ingredient that together with state-owned Belaruskali had controlled two-fifths of the $20 billion world market.

Sources familiar with Kerimov's situation say the search continues for a buyer acceptable to both the Kremlin and Lukashenko who could act as a peacemaker, smoothing business and diplomatic ties between the ex-Soviet neighbours.

Yet with a Chinese investor on board chances of restoring the cartel may have diminished, say analysts. Potash producers are increasingly selling direct rather than via cartels, pushing down prices by as much as a quarter.

(Reporting by Andrei Makhovsky; Writing in Moscow by Lidia Kelly and Douglas Busvine, Editing by Timothy Heritage and Elizabeth Piper)