The Russian Foreign Ministry says it may retaliate for Sweden's decision to expel two Russian diplomats.
The diplomatic incident revolves around a case of industrial espionage at one of the world's biggest electronics companies, Sweden's Ericsson corporation.
Ericsson makes military radar systems for customers worldwide, and is one of the world's largest manufacturers of mobile telephones. It is not known exactly what type of information was involved in the alleged espionage.
A spokeswoman for the Swedish Foreign Ministry in Stockholm, Kristina Ostergren, said Sweden is declaring two Russian diplomats "persona non grata on grounds of activities which are incompatible with their diplomatic status."
Ms. Ostergren said the expulsions are tied to an ongoing investigation into industrial espionage at Ericsson. She added that both the Russian diplomats have already left Sweden.
Later, a Russian Foreign Ministry statement said Russia "reserves the right to respond to this measure proportionately."
The espionage incident began last week, when Swedish officials detained three people who were either employees or former employees of Ericsson. One of the suspects was allegedly caught trying to hand over company information to a foreign intelligence officer.
Russian President Vladimir Putin, is meeting in Brussels with senior European Union officials. Sweden is a member of the European Union.