Liverpool have moved ahead of Arsenal and Manchester City in pursuit of the towering young Uruguay defender Sebastián Coates and are ready to offer Craig Bellamy a sensational return to Anfield.

The Wales international has been frozen out completely by Roberto Mancini at City but remains at the club on a £95,000- a-week contract. Bellamy's wage has surprisingly not deterred several Premier League clubs and Celtic from trying to prise the 32-year-old from the Etihad Stadium but Liverpool are willing to offer the striker a lucrative contract providing no transfer fee is involved.

Bellamy, a boyhood Liverpool fan, spent one season at Anfield in 2006-07 but struggled to make an impact under Rafael Benítez and was sold to West Ham United for £7.5m after 27 appearances and seven goals. He was an unused substitute in the 2007 Champions League final defeat by Milan and was destined for the Anfield exit from the moment he attacked his then team-mate John Arne Riise with a golf club during a supposed team bonding exercise in Portugal.

The striker could be joined at Anfield by Coates, the 20-year-old centre-half who was named best young player at this summer's Copa América where his performances for the tournament winners Uruguay – in the same team as Liverpool's Luis Suárez – increased interest from several Premier League clubs.

As the Guardian revealed last month, scouts from Arsenal, City and Liverpool all monitored the 6ft 6in Coates in Argentina, with Arsenal also believed to have watched the defender playing for his club side Nacional, the champions of Uruguay, a dozen times last season.

Liverpool, however, with the advantage of the Suárez connection, have emerged as Coates's most likely destination in the Premier League and could cost Fenway Sports Group, the club's owners who have already sanctioned a £110m recruitment drive this year, a fee of around £12m.

Coates was linked with a £3.5m transfer to Porto in June following the collapse of a proposed move to the Brazilian side São Paulo but his rise to prominence at the Copa América has since inflated Nacional's asking price. The central defender is one of the most highly rated young players in the game and, despite his lack of experience at international level, his Spanish and British ancestry is likely to assist any application for a work permit.

Liverpool are keen to strengthen their defence, especially after allowing Sotirios Kyrgiakos to join Wolfsburg on a free transfer. The Greece international could be followed out of Anfield by Alberto Aquilani, a target for Milan.