Increasing unemployment in Sweden has affected non‐Western residents particularly hard. A shrinking public sector, and toughening attitudes toward migrant job‐seekers within the private sector, frequently leave self‐employment as the only option. The emergence of an ethnic economy is partly due to the opportunity structure in the host society, and partly to available ethnic resources. This article examines Iranian small businesses in Stockholm. The Swedish labour market, and the situation of Iranian migrants within it, are crucial factors in. bringing about the Iranian entry into self‐employment. Yet, ethnic resources and previous work experiences in Iran also play an important role in shaping economic activities among Iranians in Sweden. This article portrays how Iranians, whose social space has been distorted by displacement, contrive to reconstruct this in the Swedish setting.