URBI ET Orbi (“for the city and for the world”) is the traditional blessing the pope offers on special occasions. Although he has at times pronounced it in other venues—St. John Lateran, the pope’s official ecclesiastical seat, or the Quirinale, now the Italian president’s residence—the pontiff usually intones the prayer from the balcony overlooking St. Peter’s Square. The ancient ceremony reminds us that the pope holds office as head of the Church because he has been elected bishop of “the city,” Rome; that he is the leader of a global organization whose very name, “Catholic,” means universal (making the whole world his parish); and that he is the head of a miniscule but internationally recognized sovereign state.

Vatican City is in its own way a nation just like any other, with foreign-policy goals, global strategies, and potential allies and adversaries. Referred to officially as “the Holy See,” it is an active participant in a wide range of international institutions including the EU, the Organization of American States, the WTO and the International Labor Organization. It holds official observer status at the UN. And curiously, four decades ago the Vatican solemnly announced that it would adhere to the Nuclear Non-Proliferation Treaty.

It is also a state with which 178 nations now have diplomatic relations, and most maintain permanent embassies to service their connections with the Vatican. Since 1984, when President Ronald Reagan dispatched William Wilson to the post, this corps of diplomats includes one from the United States. It is presently Ambassador Miguel Díaz, a Cuban-American liberation theologian appointed by President Barack Obama.

For its part, the Vatican has at its disposal a retinue of diplomats, called “nuncios,” stationed in countries around the world, and each one receives extensive training at the Pontifical Ecclesiastical Academy, founded under Pope Clement XI in 1701. According to the Vienna Convention on Diplomatic Relations of April 1961, ambassadors of the Holy See are recognized as deans of the diplomatic corps in the countries where they are stationed. This honor may derive from the fact that the first such nuncio—to Venice—was sent in 1500, considerably before nation-states began to emerge.

A retired American intelligence officer once told me that the Vatican probably has the world’s most effective intelligence-gathering operation. But other than being the eyes and ears of the Church, exactly what, one might ask, are all these people in fact doing? What specific policies do they advocate? Do they have any effect? And perhaps above all, just how much influence, if any, does the Vatican actually wield in world affairs?

The Church’s goals are deeply embedded in a centuries-old tension between its political ambitions and its religious aspirations, a tension which continues today. And as Islam begins to encroach upon more and more of Catholicism’s traditional “territory,” the Vatican must strive to balance its commitment to spreading its message with its official policy of fraternal relations with other faiths. Its success (or failure) will affect us all, for with its more than 1 billion adherents and vast array of media outlets, hospitals and universities, the Catholic Church will inevitably exert at least some degree of influence on a wide spectrum of issues.

GIVEN THE long history of the Catholic Church, it should not be surprising that its leaders want it to nurture both a spiritual and a secular persona, or that the two are not always clearly distinguishable. After the fall of the Roman Empire, the Church became, for centuries, the de facto political authority for most of Europe. Some popes were strong, others weak. They were frequently challenged by kings and emperors, and sometimes banished from Rome (once in a while by the very citizenry of “the city”). But they continued to play a role, often a decisive one, in secular affairs. Not only did Leo III crown Charlemagne, but Pius VII enthroned Napoléon (who, however, famously placed the crown on his own head).

The Church has never been reluctant to wield secular power, including for centuries an army, or to enlist allies to advance its objectives. The alliance of the pope and the king of France defeated the Cathars of Provence in the thirteenth century to the decided advantage of both throne and altar. The pontiff got rid of a troublesome heresy, and the king added a vast new domain to his realm. Nearly three hundred years later, the Church looked upon the gory subjugation of “New Spain” as a “spiritual conquest.” Soon after, some Jesuits suggested a similar approach to China: namely that it should be militarily subdued so that its people could be brought into the true Church. But the popes, preoccupied with other matters at the time (such as the Protestant Reformation), never acted on this bold proposal. One cannot help imagining today what might have happened if this ambitious scheme had been successfully executed, and what a difference it might have made in the following centuries of world history.

But times have changed. In 1870, during the Risorgimento, Italian nationalists Count Camillo di Cavour and Giuseppe Garibaldi deprived the pope of his extensive lands in Italy called “the Papal States.” Pope Pius IX condemned the conquest as illegal and then assumed the role of victim, declaring himself “the prisoner in the Vatican.” Only in 1929 did the papal Secretary of State Pietro Gasparri negotiate the concordat with Mussolini’s Italy that created a miniature sovereign Catholic state. But did the loss of its worldly estate divest the Church of its international interests or its secular and religious influence?

Most scholars now agree that it did not, at least not entirely. Losing temporal control over a few thousand square miles in central Italy may even have worked to the Vatican’s advantage. With no realm to defend and no army, it soon gave up any territorial ambitions and began to rely increasingly on its moral and spiritual authority.

EVER SINCE, people have struggled to decipher exactly what agenda this sprawling, religio-political entity intends to pursue. It might well be a powerful actor, but for what purposes will its actions be taken? And what will shape its decisions? At least in theory (that would be, according to the Code of Canon Law), the Holy See’s diplomats should “strive to promote matters which pertain to the peace, progress, and cooperative effort of peoples.” But these goals are extremely general, and the Vatican, like most other sovereign powers, does not disclose its often-convoluted inner procedures to outsiders. Getting a good grasp on actual policies takes much more work. Vatican watchers, like a previous generation of Kremlinologists, vie with each other in trying to decode the carefully parsed articles in L’Osservatore Romano, the semiofficial organ of the Holy See that publishes papal statements and church documents, and in La Civiltà Cattolica, a Rome-based Jesuit publication vetted by the Vatican secretary of state. Other sources perused for any bread crumbs that might hint at papal intentions are the pope’s annual New Year’s Day message to the diplomatic corps and the short speeches he exchanges with new ambassadors when they present credentials to him. These reveal at least what the Vatican believes would be prudent for the public to know. Scrutinizing them, however, often yields little more than what the Kremlinologists could divine from Pravda. How any particular policies were arrived at remains guesswork.

As hard as it may be for outsiders to recognize, the policies of the Vatican are driven, not entirely but to some extent, by theology. And when it comes to theology, no analysis is useful that does not begin with the pope, one of the world’s last absolute monarchs. It is also often difficult to realize that these theologies vary from one pope to the next, and even over the term of a given pontiff. Pope Pius IX (“Pio Nino”) mutated from a “liberal” to a tough conservative during the thirty-two years of his pontificate (1846–78). He was succeeded by Leo XIII (1878–1903), often considered a social progressive. Popes are important, especially since, in the past 150 years, the administration of the Church has become increasingly centralized in the papacy and its bureaucratic arm, the Roman Curia, in which the pope has the final word.

Such recent pontiffs as John XXIII, who assembled the reformist Second Vatican Council (1962–65) that aspired to reconcile the Church with the modern world, and Paul VI tried, sometimes with modest success, to exert influence in world affairs. The first Polish pontiff, John Paul II, openly supported his country’s resistance to Soviet domination. Except for the quaintly costumed Swiss Guard, equipped only with halberds, the pontiff no longer has the “divisions” Stalin once scornfully asked about, and the popes have tried to build a reputation as advocates of peace and justice as they see it.

NOW WE are faced with Joseph Ratzinger, who became pope in April 2005. Some signals are easy to read. His choice of a name, “Benedict XVI,” sent a clear message of what might be expected from his papacy. The new pope made it known that he had picked the name from two previous Benedicts. The first, the sixth-century Benedict of Nursia, was the founder of Western monasticism and is also the patron saint of Europe. This suggests that, as pope, Ratzinger wanted to work out the dream he had nourished for decades, that of transforming the European Church into a smaller, more disciplined (might one even say “monastic”?) counterculture in order to “re-evangelize” a continent, which in his view was slipping further and further into a morass of secularism and moral relativism. In this way he would take up the work of the first Benedict, whose disciplined monks first Christianized Europe. Ratzinger’s other namesake, Pope Benedict XV (1914–22), is noted for his strenuous, if ultimately unsuccessful, efforts to head off World War I, and then his attempts at peacemaking and minimizing suffering in the grips of war.

Clearly, both these two previous Benedicts had Europe on their minds. So, obviously, does the current pontiff, Benedict XVI—or at least this was the impression he created during the first two years of his tenure. Born in echt katholische Bavaria, where he served initially as a theology professor and then briefly as a bishop, Cardinal Ratzinger had little experience of the rest of the big wide world outside his region of baroque churches and votive candles before he moved to Rome. Even then, from his post as prefect of the Congregation for the Doctrine of the Faith, he stayed home and kept house.

For Vatican watchers, Benedict’s first papal statements reinforced the notion that his policies would reflect his previous writing and teaching. His first encyclical, “Deus Caritas Est” (“God is Love,” 2005), reiterated the strongly critical position he had taken against liberation theology during his term as prefect: namely, that political action was something reserved entirely for the laity and that “the Church” (meaning, in this case, the clergy) should stay out of it. His book Jesus of Nazareth, written about the same time, is a paean to the divinity and spirituality of Christ, but says little about his specific actions for the poor and the maligned of his day. Together, these two documents reminded careful readers about Ratzinger’s stance at the Second Vatican Council, where he served as an adviser to Joseph Cardinal Frings of Cologne. What some later called “the crown jewel” of the council, the schema entitled “Gaudium et Spes” (“Joy and Hope”), declared that the “joys and hopes” of the world, especially of the poor, were also the joys and hopes of the followers of Christ. Ratzinger was disparaging of this pastoral constitution of the Church, preferring a much more critical stance toward the modern world. Reflecting that, his first two papal utterances called for a smaller, tighter, more spiritually oriented Church that, especially in Europe, would challenge the momentum of secularization.

Yet it seems Pope Benedict’s political theology is changing. Catholic social ethicist Lisa Cahill reads his more recent encyclical, “Caritas in Veritate” (“Charity in Truth,” 2009), as marking a major reorientation in his thinking, and therefore presumably in the Church’s policies. In this encyclical, Benedict declares that the whole Church (and this obviously includes priests and bishops) should be involved in working for structural change, especially to nurture peace, to prevent the degradation of the planet, and to combat economic injustice and inequality.¹ These, then, represent some of the policies the Vatican may try to advance.

I think Cahill’s reading is right. “Caritas in Veritate” is phrased very circumspectly, but when it states that Catholics should work for justice alongside people of other faiths and none, it sounds at times more like John XXIII’s most important encyclical, “Pacem in Terris” (“Peace on Earth,” 1963), or even like some of the writings of the liberation theologians Ratzinger quashed during his years as prefect. Perhaps Ratzinger is learning on the job.

THE POPE is likely trying to craft a twofold approach involving a leaner, more spiritually taut Church in Europe, but one that, on the global scene, brings its resources to bear in the cause of social justice. Yet there is a larger item on the papal agenda, and it is one that might overshadow everything else. That of course is Islam. With no Protestant Reformation, anticlerical deistic French Revolution or atheistic Communism to cope with, now the religion of the Prophet—with its own 1 billion followers worldwide—has emerged as one of the two most vigorous alternatives to Catholicism. (The other is Protestant Pentecostalism, which is growing rapidly everywhere, but especially in Latin America.) It poses a clear dilemma for the pope on the religious level.

Most Vatican observers agree that, in spite of a few awkward incidents, Benedict has appeared to be more sympathetic to Islam and Muslims than many had expected. He publicly condemned the publication of caricatures of Muhammad in the Danish newspaper Jyllands-Posten. He also called upon Catholics to get to know and respect Muslim newcomers in Europe. His attitude has at times been reciprocated. For example, in September 2006, after Benedict stated that in his opinion Africa and Asia feel threatened by the West’s materialism and secularism, leaders of the Muslim communities in Italy quickly endorsed his view. “We agree with the pope,” said Roberto Piccardo, speaking for Italy’s largest Muslim group, “Muslims are puzzled by a West which is hostage to a materialistic system.” Mario Scialoja, a former president of the Muslim World League, added that the “West’s exclusion of God leads to the wrong life models.”

But, unlike Pentecostalism, a reinvigorated Islam also poses a distinct political dilemma for the Vatican. This arises in large part from the fact that the secular/religious distinction is not only less clear in some Muslim countries where religion and governance are often one and the same, but also because it varies from one to another, requiring a highly nuanced response that is often lacking with Benedict.

The complexity of the Vatican’s stance on Islam became particularly clear during the contretemps accompanying the pope’s widely reported trip to Turkey in 2006. The visit came after the pope stirred consternation in the Muslim world with his controversial lecture at the University of Regensburg in Germany on September 12, 2006. In that talk, the pope quoted a remark about Islam made by the Byzantine emperor Manuel II Paleologus in the fourteenth century. The emperor had said, “Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached.” Demands that the pope retract his statement followed. And indeed he did, or at least came close, insisting that the view he quoted was not his own.

Soon he reversed course again, on another front. Benedict had once voiced his opposition to Turkey’s entry into the EU. But even as he prepared for his historic visit to Istanbul, the pope began to rethink his strategy. A papal spokesman said the pope “viewed positively and encouraged” the process of Turkey’s entry into the EU “on the basis of common values and principles.” Though he is a vociferous critic of “secularism,” one suspects that Benedict prefers the “secular” constitution of Turkey to the systems in Saudi Arabia or Iran with their emphasis on Koranic-based sharia.

Perhaps at few times in recent Vatican history has its religious agenda so overlapped with its secular-political one as it now does in relations between the Holy See and Islam. The Vatican appears intent on encouraging religiosity in the face of secularism, and in this battle Muslims in Europe might be viewed as allies. But on the other hand, it can hardly view an increasingly “Islamized” Europe with equanimity.

HOW THE pontiff will reconcile these tensions is as yet unclear, for he must concern himself both with Catholicism’s position in the Muslim lands and Islam’s encroachment on Catholicism in the Church’s traditional areas of strength. Although a mosque now towers over one of the hills of Rome, it remains illegal to build a Christian church in Saudi Arabia. Switzerland has recently banned the erection of minarets (but, interestingly, not mosques). And as the flow of refugees into Europe continues to increase, mixing previously separated populations, the religious freedom of these people will become an ever-larger issue.

The Vatican has an official department, the Pontifical Council for the Pastoral Care of Migrants and Itinerant People, that reflects the Church’s traditional Christian policy of welcoming the stranger and sheltering refugees. But Benedict must balance this concern with his worries about the “Christian foundations” of European culture. The Vatican campaigned vigorously—albeit unsuccessfully—to include some mention of Europe’s “Christian heritage” in the constitution of the EU. Now the pope must walk a fine line in a Europe he considers sinking into secularism but whose populations are increasingly uneasy about their millions of new and very God-fearing Muslim neighbors. These questions suggest that the relationship between Catholicism and Islam will be a central preoccupation of the Vatican for a long time to come, and preparations are already under way. In fact, the Jesuit-run Pontifical Gregorian University in Rome has an ambitious program on Catholic-Muslim relations and regularly invites Muslim scholars as guest lecturers. There is some speculation that the next pope will be selected in part with an eye to his knowledge of Islam.

Is there any way of discerning what the Catholic Church will do with regard to Islam at home and abroad? The answer for the present is that it will “muddle through.” The Church thinks in terms of centuries, or even of millennia. The Vatican rarely acts precipitously. It will probably encourage more “interfaith” dialogue, but as one Vatican official told me, it will be “inter but not about faith.” He meant that given the Church’s insistence that its fundamental doctrines are never subject to change, the theological issues that divide the two traditions will not be on the table. But it will continue to encourage mutual respect among faiths, and there will undoubtedly be more conversation about cooperation on humanitarian issues such as refugees, poverty and the rights of political prisoners (like the recent role of the archbishop of Havana in releasing some of Cuba’s inmates). And on the Israeli-Palestinian issue, the Vatican will continue to support a two-state solution worked out by the parties involved. It has long since given up the aspirations it voiced decades ago for an internationalized Jerusalem with a Vatican role in its governance.

The words of Jesus, “blessed are the peacemakers,” have increasingly become a central concern of the popes. But as even a casual reading of history shows, most religions have had their outbursts of violence. Pope John Paul II publicly apologized for some of these. Now Benedict will need to continue to grapple with the Vatican’s mixed record in this area in the face of an Islamic religious tradition which is fighting its own demons.

AMONG ALL this speculation, an overarching question, of course, remains: can the Church survive, let alone deeply impact global policy as it wrestles with serious failings of its own, not just in governance, but in morality? Certainly the Church’s social teachings, in varying degrees, inform lay Catholics and thus enter into public-policy discourse. But its actions—or inactions—inform them even more. As I write this, the Catholic Church is mired in what some of its most sympathetic observers have called the greatest crisis it has confronted in centuries, possibly in its entire history. Beginning over eight years ago in the Archdiocese of Boston, and eventually reaching around the world, the clergy-sexual-abuse scandal is now knocking at the gates of the papal palace itself.² Some observers insist that the attention the press gives to the current crisis is nothing more than a vogue, and that it will soon pass as a scandal-hungry public finds something else to feast on. Others consider it much more serious. Whatever happens, it cannot be doubted that it is taking a severe toll on the laity’s confidence in anything the Church says. How the Vatican handles this will have everything to do with the Church’s future influence.

But the scandal has opened an even-deeper crisis. Not only must the Church now deal with the moral revulsion people feel about the inexcusable behavior of both the offending priests and the bishops who covered for them, but its halting response has also torn the curtain away from the self-serving culture of secrecy, deception and dissimulation that seems to engulf the Vatican’s inner life. Veteran Rome reporter Rachel Donadio described a recent statement by the Vatican on the scandal as made up of words “chosen precisely to obscure much meaning.”³

All governments of course are practiced at issuing ambiguous pronouncements, but the Vatican seems to have raised this technique to a fine art. In the face of the present crisis, this will simply not suffice. The pope and the Curia will have to do things differently if they have any hope of restoring the Holy See’s moral authority among their own people and in the wider world. First they will have to deal swiftly, justly and openly with the thousands of priests and bishops whose conduct has created immense anger and sadness among innumerable Catholics and provoked justifiable rage among additional millions of people. But second, the Vatican will now have to break from its long tradition of concealment and artful ambiguity, and make a strenuous effort toward transparency. The idea of “mystery” may be rightly applied to the Mass; but it is inappropriate when it is used to shroud the workings of the Church bureaucracy, whether in Rome itself or in diocesan headquarters anywhere in the world.

There can be little doubt that at least some recent popes have enjoyed a significant amount of moral credibility. Certainly John XXIII was one. Immensely popular both among Catholics and others, he helped bring about a tidal change in the relations of the Church to other Christians, to Jews and to people of other faiths. He also moderated the Church’s previously intransigent stance toward Communist countries. Historians are still uncovering exactly what part John Paul II played in ending the Cold War, but his role in inspiring Solidarity and the Polish resistance is beyond a doubt. Still, recent investigations suggest that the Polish pope dragged his feet in response to the pedophile scandal. The result of his and the Vatican’s arbitrary and authoritarian style has severely damaged its moral sway. One wonders how it could be regained when it is not only tainted by an epidemic of sexual abuse but diluted by a polished, self-serving duplicity.

Unfortunately, it does not seem that either the present pope or the Curia is willing to make the necessary changes. Consider the following: On Monday, June 28, 2010, the Vatican issued a communiqué reporting on a meeting between the pope and two key cardinals. One was Christoph Cardinal Schönborn, sixty-five, archbishop of Vienna and sometimes rumored to be a favorite as the next pontiff. The other was Angelo Cardinal Sodano, eighty-two, who is currently the dean of the College of Cardinals and served as John Paul II’s secretary of state. The pope convoked the meeting because Schönborn had publicly declared that when Sodano was head of that department he had stood in the way of a thorough investigation of allegations about the sexual misconduct of an archbishop in the 1990s. Despite reminding Schönborn that such criticism (presumably in public) was the sole responsibility of the pontiff himself, not of a fellow cardinal, the Vatican’s report on the meeting did not deny the substance of his complaint. Nevertheless, this was the first time ever that a pope had aired such internal disagreements in public. It is possible this was a tiny move toward openness, but it more likely simply provides further evidence of the Vatican’s skilled capacity to handle awkward issues with a minimum of clarity.

Then, in July 2010, the Vatican issued an announcement that set out new procedures for dealing with abusive priests, rules that most observers found woefully inadequate. But, to make matters considerably worse, the announcement linked pedophilia, a “grave sin,” with ordaining women to the priesthood. Many read this not just as ineptitude, but as an outrageous insult. The growing lack of confidence in the moral authority of the Church was deepened.

IT IS hard to imagine at this point how the Vatican can ever regroup, rethink and adapt. Many Catholic lay organizations seem to have simply given up on the prospect, and are either defying or just ignoring the Vatican. The Church’s official ban on contraceptives is a dead letter in America and in many other places. Many priests welcome divorced and remarried Catholics to the Communion rail. Thousands of Catholics practice yoga despite Vatican warnings about its links to pantheistic Hinduism.

Thoughtful Catholics at all levels agree that the rigid, pyramidal structure of the Catholic Church’s governance needs to change. But is this just a far-fetched dream? Certainly it seems improbable for now, but it should be recalled that given its two millennia of history, the Catholic Church’s ultracentralization is a fairly recent innovation. The mills of the gods grind slowly, and those of the Catholic Church are among the slowest. There have indeed been lurching starts toward another polity. At Vatican II, the world’s bishops tried to shape a more decentralized pattern in which they would share authority with the pope and the Curia. Though the system did not undergo any significant transformation, the vision is eloquently advocated by influential members of the hierarchy. During the last years of John Paul II’s papacy when Carlo Maria Cardinal Martini, then archbishop of Milan, was considered a serious candidate for the papacy, he often complained that the concentration of power in the Roman Curia was, after all, a rather new development, having surged mainly in the nineteenth century. Martini advocated a radical decentralization. Although he garnered a few votes early in the conclave of 2005, Martini was soon outdistanced by Ratzinger. He then retired as archbishop of Milan and now quietly pursues the biblical studies for which he is widely respected in the scholarly world. But as John XXIII demonstrated when he convoked the council, with consequences that—despite setbacks—have lasted for over half a century, popes can make a huge difference.

If the current crisis further erodes the laity’s confidence in the way the Vatican does business, and if another Martini, with decentralization on his agenda, were to become pontiff, the creative energies of lay Catholics might find their way into the Church’s international policies, power might be dispersed and a whole new picture might emerge. But whatever happens, the Holy See, confined as it is to .17 square miles, will remain an actor, mainly playing a small but not insignificant role on the world stage.

Harvey Cox is Hollis Research Professor of Divinity at Harvard.

¹ Lisa Sowle Cahill, “Caritas in Veritate: Benedict’s Global Reorientation,” Theological Studies 71, no. 2 (June 2010): 291–319.

² Laurie Goodstein and David M. Halbfinger, “Amid Sexual Abuse Scandal, an Office that Failed to Act,” New York Times, July 2, 2010.

³ Rachel Donadio, “In Rare Memo, Vatican Rebukes Cardinal,” New York Times, June 29, 2010.