The diamond-rich republic of Yakutia in Russia's Far East cut production by 59% in the first three months of 2009, with the largest local plants working at half-capacity.
Suppliers provided one sixth of the usual volume of raw materials, worth $8.5 million, in the reporting period, association vice-president Ararat Evoyan said.
The slump comes in contrast to last year's strong results, when local manufacturers produced $147 million worth of diamonds. The republic's Diamond Council expects the figure to slip to $115.5 million in 2009.
Gemstone cutting has come to a virtual standstill across the country, Evonyan said.
He said the diamond sector may have to wait until 2010 for growth to resume.