The Swedish tennis federation was fined $25,000 on Thursday and the city of Malmo was banned from hosting Davis Cup matches for five years because of the decision to play Israel behind closed doors.
The Davis Cup Committee also said Sweden will lose its choice of venue if a similar situation occurs again, and the country will be required to guarantee that future matches will be open to the public.
Sweden hosted Israel last month in the first round of the Davis Cup, losing 3-2. The best-of-five series was played behind closed doors because city officials said they couldn't guarantee security at the venue.
Critics, including the Israeli team, said Malmo was caving in to threats of violence from anti-Israel groups.
"The committee strongly condemned the decision by the city government of Malmo to refuse to allow spectators to attend the matches and the resultant fact that the Swedish Tennis Association played the tie behind closed doors," the committee said in a statement.
Besides the $25,000 fine, the Swedish federation will also be forced to pay an additional $15,000, which would have been earned in gate receipts had the three days of play been open to spectators. The Swedes had asked that the obligation to pay that fee be waived, but the Davis Cup Committee denied their request.
According to the committee's statement, the decisions were made Tuesday at a meeting in Amsterdam.
Swedish tennis federation chairman Stefan Dahlbo said his organization would appeal the decision, blaming the city of Malmo for the situation.
"It's an unfortunate consequence of individual politicians trying to score political points," Dahlbo said. "We thought the decision by Malmo was irresponsible and we still think so."
The Sweden-Israel series was played shortly after Shahar Pe'er was denied entry into the United Arab Emirates for the WTA's Dubai Tennis Championships. Amid international condemnation, the government of the UAE granted Andy Ram entry for the men's tournament in the following week.
Malmo, Sweden's third largest city, has a left-leaning local government and a large Muslim minority. Its leaders strongly criticized Israel after the Gaza invasion, and some called for dropping the Davis Cup match against Israel altogether.
Stockholm has a center-right majority that is more pro-Israeli, and the Swedish capital offered to step in as an alternative venue, saying it was better prepared to guarantee security. But that plan was canceled when Stockholm officials realized they wouldn't be able to get organized in time for the March 6-8 series.
The Swedes will now be forced to guarantee to the International Tennis Federation that every Davis Cup series in the Scandinavian country will be open to fans.
"This must be confirmed in writing by the Sweden Tennis Association to the ITF eight weeks before the commencement of each tie," the committee said.