A Ukrainian court has released a potential suspect and key witness in the shooting down of MH17, as Russia’s president said the two countries were working on a deal to swap prisoners.

Vladimir Tsemakh had bragged on video of commanding an anti-air brigade in separatist-held east Ukraine and indicated he hid evidence of a Buk missile system, the kind Dutch investigators say shot down the Malaysia Airlines jet with 298 people on board.

Tsemakh, who was arrested in a raid in June, has been charged with terrorism for his part fighting for the Russian-backed separatists, but on Thursday he was abruptly released on his own recognisance pending trial.

His place in a swap with Russia has not been confirmed but has been widely rumoured in media. The Russian president, Vladimir Putin, speaking at an economic forum shortly after Tsemakh’s release on Thursday, said Moscow and Kyiv were finalising talks on whom to exchange, adding that the swap would be “large”. He did not specifically mention Tsemakh.

The reports have worried Dutch investigators and lawmakers, who fear Russia will pressure Ukraine to give up one of the few suspects in the case in custody. Russia is holding dozens of Ukrainian prisoners, including 24 sailors captured in November and the film-maker Oleh Sentsov.

Forty European MEPs called on the Ukrainian president, Volodymyr Zelenskiy, this week not to release Tsemakh, saying in a letter: “His availability and testimony before the joint investigation team is thus of the utmost importance for an effective prosecution by the countries involved.”

In a telephone interview, Kati Piri, a member of the European parliament from the Netherlands, said: “It seems to be preparations to swap him. Of course we don’t know this 100% for sure yet but that’s how I read the signals.

“You can imagine that not just for the Netherlands, but also for the EU and all the families of the victims of MH17, this is a very, very bad moment … I understand the situation but not on MH17, not just a witness but possible suspect, that is a step too far from our perspective.”

According to reports, Tsemakh was captured in a raid into eastern Ukraine behind the lines controlled by Russian-backed separatists and then smuggled out of the region, possibly in disguise.

His capture was quickly publicised and recognised as a possible breakthrough in the Dutch-led investigation into the attack on MH17. Of the 298 passengers, 196 were Dutch citizens. Yet during his time behind bars Tsemakh was not questioned by Dutch investigators, who said on Wednesday they wanted to speak to him as a person of interest in the case.

Brechtje van de Moosdijk, a spokeswoman for the Dutch-led MH17 investigation, told the Associated Press: “If he’s being swapped then, well, of course it’s hard to say that we can speak to him when he would be in Russia.”

Ukrainian media have also released a leaked letter from the Dutch investigation head, Fred Westerbeke, calling Tsemakh a suspect in the downing of MH17, rather than just a witness. The letter’s authenticity has been confirmed by the Dutch outlet NRC.

Tsemakh is a Ukrainian citizen and his release to Russia would mark an unusually strong interest by Moscow in the case of a foreign citizen. The Dutch-led investigation has named four suspects in the downing of MH17, including one Ukrainian and three Russian citizens. All are believed to be living in Russia or Crimea. The most prominent, the former separatist leader Igor Girkin, lives openly in Moscow.