Because officially they were neutral and it was in the Swedes' best interest for it to stay that way. However, Sweden also supplied the Germans with iron ore; escorted German merchant ships in the Baltic; German deserters (from Norway) were handed over to the Germans; Sweden supplied Germany with machinery parts essential to the war effort (especially ball bearings after Schweinfurth), the USAAF and RAF strategic bombing campaign failed in its goal to paralyze German industry largely because the Swedes sold everything the Germans needed. The German invasion of Norway had in essence only one objective: Protect the shipping route for Swedish iron from Allied interdiction. Sweden was also traditionally and culturally friendly with Germany. The Swedish king, Gustav V, was well befriended with many of the high-ranking Nazi leaders; Hermann Göring for example actually received a Knight Grand Cross First Class of the Swedish "Order of the Sword" from the king himself. Just like Spain, Sweden was a de facto German ally, though not militarily engaged in the war.
Whoa! Quite a bit true I'm afraid, but some NOT perhaps.... Some things to be added are that lots of the Iron ore was from N-Norway but since the RN was hunting on the North sea, the land route (rail) was much better through Sweden. (From upland Norway there was no heavy transport, - look at a map and you will see why).
Norway also offered a coastal opening to the N-Atlantic, which Sweden does NOT, and I'm afraid you have things turned over, - the capture of Norway offers no benefit in transporting Swedish goods to Germany. Or please explain this statement "Protect the shipping route for Swedish iron from Allied interdiction" ?????????????????????
As for the deals, they worked both ways. Sweden would sell to anyone (Just as the USA would have until Pearl), and Sweden DID. Both the RN and the Kriegsmarine were well familiar with Bofors guns for instance. However, Sweden's geographical position was very much favourable for trading with Germany than the UK, who additionally was about bankrupt in 1940...
Now, some little thing in Sweden's favour...
They did also work with the Western allies. Nels Bohr was evacuated from Sweden (?), - anyway, there was a specially equipped Mosquito doing runs from the UK to Sweden. "Special" means that the bomb bay was equipped for carrying a person in the bomb bay on a sort of a bed.
Isn't this aircraft at Hendon BTW??