There are a number of possibilities:
o There is a signal wire from the A/C compressor to the ECU that is supposed to raise the idle to something like 900 rpm when the A/C is on. If that signal is missing then that would explain your problem, however unless the wire is detached or damaged that is unlikely provided that the A/C compressor is actually running (a low refrigerant charge will prevent the A/C from running).
o The idle air control valve (under the intake manifold) may be getting a bit sticky and not responding to the ECU signal to open a bit wider when the A/C is on. If solidly tapping on it while the engine is running makes the idle rise then that is likely the problem.
o The idle air control valve may not be able to open any wider which might be the case if the throttle body was particularly dirty (especially the tiny air bypass channels) or misadjusted. A thorough cleaning of the throttle body followed by a compressed air blow job may be in order. The throttle body, TPS switch and linkages may also need readjusting if the settings have ever been touched.
o Although it escapes me exactly how it might cause your symptoms on a non-turbo, an intake air leak (like a split or disconnected vacuum hose) can cause all kinds of idle problems.
o I vaguely remember a Volvo TSB that addresses stalling due to low A/C idle, especially at higher altitudes. I believe part of the fix involved a PROM upgrade for certain ECU's. If all else failed (as might apply in your case), the solution was to force the throttle plate to stay a bit more open at the rest position by turning in the throttle plate stop screw a bit further than the normal 1/4 turn after contact with its stop (the throttle position sensor switch will need to be re-adjusted at the same time). This in essence raises the base idle (the base idle is otherwise not adjustable on "newer" cars like yours).

I'd start with a throttle body cleaning.
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Dave -not to be confused with a real expert, just goofing around at this