The diplomatic fallout over the burning of the Quran outside a mosque in Sweden is threatening to escalate into a trade war after calls from Muslims in the Middle East and North Africa came to boycott Swedish products.

Last month, a 37-year-old Iraqi refugee who wants the book banned tore out pages from the Quran and set them alight outside of Stockholm's central mosque. A key point of contention is the fact that the protest was given the go-ahead by a Swedish court.

Turkey's president Recep Tayyip Erdogan has led a chorus of criticism from a host of Islamic governments over the decision to allow anti-Islam protests to go ahead. "We will eventually teach the arrogant Westerners that insulting Muslims is not freedom of thought," Erdogan said in televised remarks.

Saudi Arabia noted how the act coincided with the Eid al-Adha religious festival and the end of the Hajj pilgrimage: "These hateful and repeated acts cannot be accepted with any justification," the Saudi Foreign Ministry said.

Who is calling for a trade boycott?

Earlier this week, the Cairo-based Al-Azhar mosque, the oldest Sunni institution in the Muslim world, urged Muslims to boycott Swedish products over the recent Quran burning. It suggested a similar boycott of Danish products amid two incidences of Quran burnings this week in Copenhagen, Denmark's capital. The mosque decried decisions by those governments that allowed the burning of Islam's holy book.

Yemen's Minister of Industry and Trade Muhammad Sharif al-Mutahar announced a boycott of Swedish products earlier this month. Similarly, Mohsen Rezaei, secretary of Iran's Supreme Council of Economic Coordination, called for a boycott on July 23.

Now Muslims in the Middle East and North Africa have taken to social media to call for a boycott of Swedish products using the hashtags "punish the Swedish government" and "boycott Swedish products."

Sweden is one of Europe's largest economies with a GDP of $585.94 billion, according to the World Bank. It is also home to major multinational companies such as Ikea, which produces and sells furniture and home accessories, high-street fashion retailer H&M, home appliance manufacturer Electrolux and mobile technology provider Ericsson.

According to figures provided to DW by the Swedish Chamber of Commerce, 2.6% of Swedish exports went to the Middle East and North Africa in 2022 ($4.88 billion, or 51.4 billion Swedish krona).

The biggest importers of Swedish products among Muslim countries are Turkey and Saudi Arabia, according to the United Nations COMTRADE database, followed by Egypt, United Arab Emirates, Indonesia, Malaysia, Morocco, Qatar, Algeria and Pakistan.

Concern from business groups

Business Sweden, a business development group jointly owned by the Swedish state and the Swedish business sector with offices in countries including Morocco, Saudi Arabia and UAE, said that "Swedish companies generally have a good reputation and are considered exemplary employers with a strong understanding and connection to local communities." The group added that it was closely monitoring the "unfortunate" situation.

"It is important to remember that Swedish companies have deep roots in many Muslim countries," it said in a statement to DW. "We want to emphasize that the events in Sweden, where the Quran was burned, do not in any way reflect our values, and it is something that, like the Swedish government, we condemn and distance ourselves from."

The rapid urbanization in the Middle East and North Africa has turned the region into an attractive export market where demand for technological innovation is growing — particularly in the information technology and communications, transport, health and energy sectors.

Saudi Arabia and UAE are two of the biggest trade export partners for Sweden's exports-orientated, manufacturing-based economy, said Keith Boyfield, a senior fellow at the Euro-Gulf Information Center (EGIC).

The Gulf has one of the biggest sovereign wealth funds in the world: the Kingdom of Saudi Arabia's public investment fund is aiming to manage assets of over a trillion dollars by 2025. Almost a quarter of those assets are already held outside of Saudi Arabia.

"I think that one of the most significant things is, if there's a continued disagreement about the issue of free speech, you might find that Gulf sovereign wealth funds bypass Sweden," Boyfield told DW. "That's important because they are a tremendous source of capital in terms of investment into industry and services."

Fears of further protests

Sweden scrapped its blasphemy laws in the 1970s and now has some of the strongest legal predections for the freedom of expression in the world. But the country does not have a law that specifically prohibits burnings or desecrations of religious texts, including the Quran.

Boyfield said that at a conference earlier this year, Swedish business leaders were already extremely concerned about the way in which the authorities were, in their view, failing to prosecute protestors who burned the Quran. However, he added that because Sweden imports most of its oil and natural gas from Norway and other countries outside of the Middle East, it was important to emphasize that Gulf states have very little in terms of leverage over the Nordic country.

"If there's an issue over trade, it strikes me that tourism is going to be one of the key sectors where the Gulf will lose out," he said, adding that Gulf states had been looking to attract Scandinavian tourists and have also been investing heavily in sports such as golf.

Meanwhile, Swedish prime minister Ulf Kristersson has said that he is "extremely worried" about the consequences if more demonstrations go ahead in which the Quran is desecrated. "If they are granted, we are going to face some days where there is a clear risk of something serious happening," he told Swedish news agency TT. "I am extremely worried about what it could lead to."

Referring to an online disinformation campaign by Russian-backed actors, Sweden's security service SAPO said the image of Sweden, which is looking to join the NATO military alliance, has changed "from a tolerant country to a country hostile to Islam and Muslims, where attacks on Muslims are sanctioned by the state and where Muslim children can be kidnapped by social services." SAPO has kept its assessment of the threat level at 3 on a scale of 5, signifying an "elevated threat."