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UPDATE 2-Algeria suspends grain agency head in corruption probe - govt sources

sources@ (Updates with grain trader reaction, background)

ALGIERS, July 15 (Reuters) - Algeria's government has suspended the head of grains agency OAIC over corruption allegations, sources close to the prime minister's office said, creating uncertainty for traders who supply one of the world's biggest cereal importers.

The decision to suspend Mohamed Belabdi pending the completion of investigations was taken at a government meeting chaired by Prime Minister Noureddine Bedoui, the sources told Reuters on Monday.

The government also decided to shut a total of 45 mills in relation to the alleged corruption case.

Belabdi is accused of "inflating bills and making false statements," one of the sources said.

OAIC did not answer telephone calls from Reuters seeking comment.

Algeria has placed several former senior officials in custody since mass protests broke out earlier this year demanding the removal of the ruling elite and the prosecution of people suspected of involvement in corruption.

OAIC has a monopoly over wheat imports and purchases 7-8 million tonnes of the cereal annually through international tenders in order to supply flour mills.

French supplies usually account for the majority of Algeria's wheat imports, making the North African country the top export destination for French wheat.

European traders said it was too early to tell if the corruption probe would alter the functioning of OAIC.

But the suspension of Belabdi comes as traders are already anticipating possible changes in Algeria's import policy due to budgetary constraints and efforts by top wheat exporter Russia to gain access to the Algerian market.

"This shows they are continuing to clean things up and to keep a close eye on spending," one European grain trader said of the probe into OAIC. (Reporting by Hamid Ould Ahmed; additional reporting by Valerie Parent in Paris, Editing by Jan Harvey and Kirsten Donovan)