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Martin -
The harness going under the front of the engine is notorious for messing things up after the insulation has crumbled and gone. On my 1983, 1984, and 1986 B230F 244's I have re-habbed that harness.
The large wire is usually OK. The smaller ones are black to the oil pressure sensor. Red to the alternator D+/61, spade lug. That last is the one giving you problems. When it is grounded the instrument lights are on. Usually the ground goes through the alternator slip rings via the brushes. When the alternator produces current, no ground, lights go out. If the oil sensor lead grounds, oil light is on.
You can temporarily by-pass a bad D+/61 lead with a wire from that spade lug to the other end of it which is in the gray 8-position connector mounted on the firewall about center. If you do this, be careful handling that connector as ALL the leads there have the deteriorating insulation problem. The D+/61 wire is #3 where #1 is black, #2 is yellow, and #4 is empty unless you have a carburetor. I hope this helps.
Good Luck,
Bob
PS You might visit www.volvocars.com/lit and check into getting a Volvo Service Manual Wiring Diagrams for your wagon. I've found them invaluable.
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