MOSCOW (Reuters) - Tycoon Mikhail Prokhorov agreed to buy a stake in Uralkali (>> Uralkaliy OAO), the world's largest potash miner, as Russia seeks to ease tensions over the collapse of a potash sales cartel with Belarus that drove down global prices.

The deal was blessed by President Vladimir Putin, sources familiar with the matter said, in a bid to repair ties with Belarus President Alexander Lukashenko. Russia's ally had arrested Uralkali's boss after the Russian firm quit the marketing pact.

Prokhorov's investment firm, Onexim, said on Monday it expected to quickly complete the purchase of Suleiman Kerimov's 21.75 percent stake in Uralkali.

Talks continued on the sale of stakes held by Kerimov's partners to other buyers in side deals, which linked together would secure Prokhorov and his allies strategic control over the business.

Lukashenko, riled by the Uralkali gambit which hit a major export earner for Belarus, has demanded that Kerimov sell out as a precondition for freeing Uralkali Chief Executive Vladislav Baumgertner from house arrest in Minsk.

Uralkali shares gained 3 percent but were still down 4 percent from levels in July, when it quit the Belarusian Potash Company (BPC) joint venture, which controlled two-fifths of the $20 billion world market.

"If this helps to stabilize the market and to reach global peace, we would be glad," BPC representative Irina Savchenko told Reuters. She declined to comment on the possible re-creation of the joint trading venture with Russia.

Uralkali's dash for market share triggered a 20 percent drop in prices of potash, a fertilizer ingredient, leading farmers to hold off on purchases in anticipation of further falls.

Analysts doubt that the cartel can quickly be restored in an industry plagued by overcapacity.

"A shift to a joint distribution is not as likely as many market participants believe," Bank of America Merrill Lynch analyst Eduard Faritov said a note, adding that Prokhorov would be reluctant to cede sales volumes to Belarus.

TYCOON-TURNED-POLITICIAN

Prokhorov, a long-time former business partner of Kerimov, has launched a political career in Russia. He ran against Putin in last year's presidential election, placing second, and remains a leading figure in the Russian business establishment.

"The purchase of the stake in Uralkali is a long-term investment in a company that is unique from the standpoint of its position in its industry and its role in the world economy," Onexim Chief Executive Dmitry Razumov said in a statement.

Sources on both sides of the talks said Kerimov's asking price was based on a $20 billion equity valuation but that the final price was flexible and would probably be slightly lower. Uralkali was worth $15.8 billion at Friday's market close.

"There is still quite a lot of wood to chop in terms of negotiating it and funding," said one financial source familiar with talks on the deal.

Prokhorov, who owns the Brooklyn Nets basketball team and is estimated to have a fortune of $13 billion, is flush with cash after selling his stake in gold miner Polyus (>> Polyus Gold International Ltd) a year ago to Kerimov and partners for $3.6 billion.

State-controlled banks Sberbank (>> Sberbank Rossii OAO) and VTB (>> Bank VTB OAO), and possibly a European bank, may back the deal, the sources said.

Kerimov, the Dagestani-born owner of top-flight Russian soccer club Anzhi Makhachkala, was a reluctant seller but was willing to do so to secure Baumgertner's release, the sources said.

Baumgertner was arrested in Minsk and has been charged with exceeding his powers and embezzlement. He faces up to 12 years in jail if convicted. The Belarusian investigative committee declined to comment on Monday.

TALKS CONTINUE

At the same time, Kerimov's partners - Filaret Galtchev with 7 percent of Uralkali and Anatoly Skurov with 4.8 percent - continued talks on the possible sale of their stakes.

Dmitry Mazepin, co-owner of fertilizer producer Uralchem, and Russian state arms-to-technology group Rostec are interested in the stakes of Kerimov's partners, the sources said.

Belarus-born Mazepin could help Prokhorov manage Uralkali and its relations with Minsk, one source said. Rostec, run by Putin's colleague at his KGB posting in 1980s East Germany, Sergei Chemezov, would serve as a "minder" for the Kremlin if it was brought into the deal, the source added.

Asked whether the Kremlin had given the deal a green light, Putin's spokesman Dmitry Peskov said: "This is totally a business issue, and one doesn't need approval from the Kremlin."

Russian state company Rostec does not plan to buy Uralkali, a Rostec representative said. Uralkali declined to comment.

Uralkali holds around 12 percent of its shares in treasury, and these are expected to be cancelled within six months. Should Kerimov's partners also sell, the buyers' combined stake would rise to 38 percent, ensuring de facto control over the business.

(This story has been refiled to to fix the syntax in lede)

(Additional reporting by Darya Korsunskaya, Alexei Anishchuk, Gleb Stolyarov, Vladimir Soldatkin, Megan Davies in Moscow, and Andrei Makhovsky in Minsk; Editing by Douglas Busvine and Jane Baird)

By Polina Devitt