In this paper we propose a new image coding technique, which consists of the Space Frequency Quantization (SFQ), and a fuzzy context based modeling. The Space Frequency Quantization (SFQ) is an effective coding technique, which uses a zerotree pruning of wavelet coefficients. After the Space Frequency quantization is applied to the wavelet coefficients the non-pruned coefficients are quantized using context modeling. The context based quantization technique uses the partitioning proposed by the Trellis Coded Quantization and the fuzzy logic to predict the next TCQ state from the context. Quantized indices are entropy coded using an arithmetic coder. The probability estimation is based on the observation of the past coded bits. The results of the proposed compression scheme showed that the proposed coder outperforms the state-of-the-art coders in the RD sense for the SAR data compression.