RUSSIA HAS again slashed its grain harvest forecast and warned that a suspension of exports could be extended into 2011, as it battles drought and wildfires that could knock a percentage point from this year’s gross domestic product.

Analysts believe the damage to agriculture, industry and other sectors caused by the record heatwave could reach $15 billion (€11.4 billion), even before factoring in the cost of rebuilding razed homes and businesses and compensating relatives of those who have died in the fires.

The death toll is rising after weeks of scorching heat ignited tinder-dry forest and farmland across central and southern Russia and triggered deep-lying fires in the peat bogs that surround Moscow, sending a vast cloud of thick, acrid smog across the city of 10.5 million.

Prime minister Vladimir Putin drove world wheat prices to their highest level in almost two years last week, when he announced a suspension of grain exports until the end of the year. After slipping back, prices rose again when he revealed that the export halt may be extended into 2011.

“If someone is waiting for December 31st, he is waiting in vain. A decision may be taken only after the harvesting campaign results are clear,” Mr Putin said, adding that seed planting for winter wheat would be badly disrupted unless rain came in the coming days.

Mr Putin said the grain harvest may fall to 60 million tonnes, compared to 97 million tonnes last year.

The suspension of supplies from the world’s third-largest wheat grower has caused concern in major importing nations in Africa, the Middle East and parts of Asia. Officials in Egypt, the biggest importer of wheat, said Russia had agreed to review and reschedule previously contracted October wheat deliveries.

Problems caused by Russia’s drought are compounded by a similar situation in the parched fields of Kazakhstan and in Ukraine, where the main grain growers’ association has predicted that this year’s harvest will be 10 per cent lower than last year’s.

The dramatic reduction in so-called Black Sea wheat exports has raised fears of the kind of food crisis that sparked riots from Egypt to Haiti in 2008, although experts insist that stockpiles are now much larger than two years ago.

The drought is expected to force up food prices in Russia, fuelling inflation and hampering its recovery from a slump that saw the economy shrink by 7.9 per cent last year.