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I think it's the ignition switch. Try the simplest thing: just rotate the key back a little bit from the START position. In the START position, most accessories turn off. In ON, everything works- it may simply not be returning to the ON position fully. Sometimes it's as simple as a really large, heavy ring of keys. Honest! I've seen it lots of times! And all these cars are known for having sticky ignition locks, right up into the 850/S70 series.
The real fix ultimately will be to replace the switch part of the ignition- the electrical part on the back of the mechanical key/steering lock part. It's about $32 from Volvo, and shouldn't break the bank to have it installed.
You can do it yourself too if you don't mind tearing into the dashboard a bit.
That's my guess, but I would also verify condition of the fuses, and inspect the connection block behind the battery, on the left front inside fender- it's under a black cover, and you could have pulled a wire off of there, or possibly one got cut. In my 87, the bracket holding the coil got broken- the rough edge severed a wire to the headlight relay and I couldn't change the highbeams to low beams... weird stuff can happen right in that spot behind the battery. Look for a possibly disconnected or broken red wire there, but I'm betting on the ignition switch.
Good luck!!!
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Rob Bareiss, New London CT ::: '87 244DL/M47- 225K, 88 744GLE- 209K, 91 244 183K. Also responsible for the care and feeding of: 88 745GLE, 229K, 88 244GL, 146K, 87 244DL, 235K, 88 245DL, 236K
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