Chapter 146. The Vatican as a Power: Concordats, Cold War Diplomacy, the Vatican Bank and Gladio

The Holy See is unusual among religious bodies: it is a sovereign subject of international law, it signs treaties, it keeps diplomats, and since 1929 it has had its own territory and its own bank. This double nature has produced a large literature: investigative journalism, Protestant and traditionalist polemic, intelligence memoir and alleged insider testimony. This chapter follows the Vatican as a political and financial actor from 1929 to the Francis pontificate, setting out each source’s claim and evidence and noting where a reference work confirms the underlying fact.

The Roman Question and the Lateran settlement (1929)

When the Italian state took Rome in 1870, the popes refused to recognise the loss and confined themselves to the Vatican. Nino Lo Bello writes that “this self-imprisonment kept the so-called Roman Question alive for over half a century; not until the signing of the Lateran Treaty in 1929 did the Vatican accept compensation” [Lo Bello, The Vatican Empire, #54189, “The Lateran Treaty”]. He describes the 1929 settlement as “actually a unity of three separate agreements”. His verdict: “if the Lateran Treaty was a major coup for Mussolini, it was to be an even bigger victory for the Vatican … today the Vatican is solidly entrenched in the Italian economy” [Lo Bello, #54189].

David Yallop quotes the financial clause directly: “Italy undertakes to pay the Holy See, on the ratification of the Treaty, the sum of 750 million lire and to hand over at the same time Consolidated 5 per cent State Bonds to the bearer for the nominal value of one billion lire.” He converts this to 81 million dollars at the 1929 rate and “approximately 500 million dollars” in 1984 terms, and treats the payment as the founding capital of what he calls “Vatican Incorporated”. He also notes that the concordat with Hitler’s Reich followed soon after [Yallop, In God’s Name, #61893, ch. 3]. Avro Manhattan, a Protestant critic of the papacy, speaks of “the 100 million dollars which Fascist Italy had put into the Vatican coffers”, administered by a special agency that began “a brand-new policy … one of international investments”. He sums up 1929 as the moment “the Vatican-Fascism betrothal became a formal and official marriage” [Manhattan, The Vatican Billions, #64831, ch. 36]. Paul L. Williams adds a political detail: “Mussolini’s signature on the Lateran Treaty in 1929 enabled Pius XI to have De Gasperi released into papal custody”. De Gasperi later led post-war Christian Democrat Italy [Williams, The Vatican Exposed, #67453].

Manhattan alone adds that while the Vatican was “publicly fulminating against Bolshevism”, its diplomats held secret negotiations with the Kremlin: “Lenin agreed with the pope … Papal commissions … were despatched to Bolshevik Russia, disguised as famine-relief missions” [Manhattan, #64831, ch. 36]. The passage gives no archival reference.

The Reichskonkordat and the Pius XII controversy

The reference shelf fixes the basic fact: the concordat between the Holy See and the German Reich was signed in Rome on 20 July 1933, by Cardinal Secretary of State Eugenio Pacelli and Vice-Chancellor Franz von Papen [Wikipedia: Reichskonkordat]. In return for guarantees for Catholic institutions, the Church agreed that clergy would withdraw from party politics [Wikipedia: Pope Pius XI and Germany].

Other literature in the library goes much further. The anonymous anti-Catholic tract The Secret Terrorist (shelved under Paranormal & Conspiracy) says that “the whole Vatican-Hitler bargain had been conducted in secret before Hitler became Chancellor of Germany in January 1933”. It claims a concordat followed “under terms of which the church swore allegiance to the Nazi regime” [The Secret Terrorist, #79644, ch. 7]. The tract dates the concordat to June, whereas the reference shelf gives 20 July.

The figure of Pius XII (Pacelli, pope 1939-1958) divides the sources most sharply. John Cornwell’s Hitler’s Pope (1999) argued that Pacelli’s pursuit of the concordat helped legitimise the Nazi regime, and that his drive for centralised papal power, together with what Cornwell called an “antipathy toward the Jews”, led to silence over the Holocaust. Cornwell later moderated some of these conclusions. In 2004 he wrote that Pius “had so little scope of action that it is impossible to judge the motives for his silence”, but he still held that the pope owed a post-war explanation. Historians including Martin Gilbert have credited Pius with actions that saved Jews [Wikipedia: Hitler’s Pope].

The opposite thesis comes from Ion Mihai Pacepa, the former acting chief of Romanian foreign intelligence who defected in 1978, writing with the law professor Ronald Rychlak. They argue that the “Hitler’s Pope” image was manufactured by Soviet bloc disinformation and launched through Rolf Hochhuth’s play The Deputy (1963). In Pacepa’s account, “‘Seat 12’ was the code name for the Romanian side of the KGB’s operation against Pius XII … an allusion to the pope as occupant of the seat of Saint Peter”. He says the KGB wanted original Vatican documents “so as to give the impression that its allegation that Pius XII was ‘Hitler’s Pope'” rested on archival proof [Pacepa & Rychlak, Disinformation, #76607, Part on Pius XII, chs. 17-22]. Their documentation draws on Rychlak’s own Hitler, the War and the Pope (2000) and on a wide literature on both sides of the debate [Pacepa & Rychlak, #76607, chs. 25 and 44]. No independent reference source in the library confirms either side’s core claim, Cornwell’s about motive or Pacepa’s about the KGB authoring the campaign.

Cold War diplomacy: missions, Ostpolitik and Gladio

The nineteenth-century Encyclopedia of Missions records that American missionaries in Peking were “on many occasions, left in charge of the legation as acting ambassador”, and that “diplomatic negotiations with smaller tribes and kingdoms – especially in Oceania – have received aid from the same source” [Encyclopedia of Missions, #64675, article on missions and diplomacy].

After the Second Vatican Council the Holy See adopted Ostpolitik, a policy of negotiated accommodation with communist states. Its architect, Agostino Casaroli, signed a partial agreement with Hungary in 1964 and a protocol with Yugoslavia in 1966, “the first time the Holy See had opened itself in this way to Communist governments”. As John Paul II’s Secretary of State from 1979, he was regarded as an “irreplaceable asset in the struggle against the Soviet Union”. According to John Koehler, Casaroli’s office was a primary KGB espionage target, bugged through a gift from his own nephew [Wikipedia: Agostino Casaroli].

Paul L. Williams sets the Vatican within the Western side of the Cold War. In Operation Gladio he argues for an alliance of the CIA, the Vatican and the Mafia that ran stay-behind networks and financial channels in post-war Italy. He links the Vatican Bank’s dealings with Michele Sindona to that alliance, for example Sindona’s purchase of “143 million shares from the Vatican at double the market price” [Williams, Operation Gladio, #66761; same text in gladio-unholy, #82137]. He supports it with press reports, court records and declassified CIA files, such as those on Giovanni Montini (Paul VI). The coordinated triple alliance is his inference from that material, not a court finding [Williams, #67453, ch. 9 notes].

The Vatican Bank, Banco Ambrosiano and P2

The Institute for the Works of Religion (IOR), the “Vatican Bank”, was the main shareholder of Banco Ambrosiano. Its president, Archbishop Paul Marcinkus, was a director of Ambrosiano Overseas in Nassau. Ambrosiano’s chairman Roberto Calvi, “God’s banker”, built an offshore network through which, by 1982, $1.287 billion could not be accounted for. Calvi was found hanging from Blackfriars Bridge in London on 18 June 1982. The Holy See later “agreed to pay out a substantial sum without accepting liability”. In 1998 Licio Gelli, head of the Propaganda Due (P2) lodge, had his 12-year sentence for the Ambrosiano crash confirmed [Wikipedia: Banco Ambrosiano]. The 1981 police raid on the P2 office, made to arrest Gelli and gather evidence against Calvi, preceded Calvi’s conviction and four-year sentence [Wikipedia: Banco Ambrosiano].

Yallop reconstructs the mechanics. In 1976, when Calvi wished to acquire 53.3 per cent of the Banca Mercantile of Florence, the shares “found their convoluted way on December 17th to Milan stockbrokers Giammei and Company, who frequently acted on behalf of the Vatican. By dexterous paperwork the shares were ‘parked’ on the same day at the Vatican Bank” [Yallop, #61893]. Williams quotes the letter of 21 January 1981 in which Milanese Ambrosiano shareholders urged John Paul II to investigate “the unholy ties between Marcinkus, Calvi, Umberto Ortolani, Gelli, and the huge flow of cash”. He notes that Marcinkus was promoted even though the circulating P2 list showed “the Gorilla” to be a Freemason, in breach of canon law [Williams, #66761]. Williams also reports his own experience: while writing a book for Doubleday’s Catholic imprint, “I was told to expunge all references to the Vatican Bank, including the donation of Mussolini, the Ambrosiano affair, and the P2 scandal” [Williams, #66761, Introduction].

The death of John Paul I and an alleged insider

Albino Luciani was elected pope in August 1978 and died after 33 days, on the night of 28-29 September. Yallop’s central thesis is that the death is bound up with the financial scandals. He writes that Luciani had “personal experience of the manner in which Marcinkus operated the Vatican Bank” from the Banca Cattolica sale, and that he was concerned about P2’s penetration of the Vatican. He concludes: “on September 28th, 1978, these six men, Marcinkus, Villot, Calvi, Sindona, Cody and Gelli had much to fear if the Papacy of John Paul I continued” [Yallop, #61893]. The opposing reading comes from Cornwell, who “concluded that the Pope was not murdered but died of a pulmonary embolism, possibly brought on by overwork and neglect” [Wikipedia: John Cornwell (writer)].

A further account appears in a work attributed to “Monsignor” Rafael Rodriguez Guillen; the library catalogue lists him as author, unverified, and describes the book as an exposé of “alleged institutional corruption”. He calls Marcinkus “the master and intellectual agent responsible for the scheme of billions of dollars of counterfeited money, and who also finances the trips of the Pope Wojtyla”. He calls a Bahamas bank “one of the fiscal paradises through which Marcinkus operated with Roberto Calvi” and names Villot and Gelli as part of the network, relying largely on Richard Hammond’s The Vatican Connection [Rodriguez Guillen, The Vatican’s Mafia, #71502, “The Archbishop Marcinkus and the Vatican’s Mafia”].

The Francis pontificate and Keshe’s reading

The traditionalist-conservative Diabolical, published in 2018 and written by Milo Yiannopoulos (the library record lists no author), describes the Vatican Bank as “essentially an offshore bank in the middle of Rome” and “a money-launderer’s paradise”. It alleges that a group it calls “Team Francis” or “the Lavender Mafia” covered up abuse, notably in the McCarrick case, “in service to the continued power of a small group of cardinals”. The stake, it says, is “spiritual authority over 1.2 billion people”. It attacks the September 2018 agreement with Beijing as having “codified Communist Party interference in the selection of Chinese bishops” [Diabolical, #71209, “Enemy of the People”; “Make the Vatican Straight”].

Mehran Keshe offers his own reading. In KSW 422 (3 March 2022) he claims the Pope had financed an attempt, “through Americans and NATO”, to take over the finances of the Russian Orthodox Church in Ukraine. He says the Pope’s visit to the Russian embassy on the eve of the war meant “accepting the defeat”, with a guarantee of payment: “Don’t worry about this Ukraine business, Vatican has already paid for it. And they receive the bill everyday”. He claims that “the Queen is a servant of the Vatican”, that the British monarchy “took revenge on loosing the Church of England to Vatican, by taking 140 billion dollars of gold from the vaults of Libya”, and that Britain was “kicked out of the EU (through Brexit)” for not sharing it [Keshe, KSW 422, #378134]. In KSW 307 (19 December 2019) he states: “The Rothschild’s group has financed wars through Vatican, they put the money in and Vatican uses the name of the soul to create wars” [Keshe, KSW 307, #378019]. These are Keshe’s claims; the other sources in this chapter do not discuss them.

Key points

• Lo Bello, Yallop and Manhattan agree that the 1929 Lateran settlement made the papacy a financial power; Yallop gives the treaty’s exact terms (750 million lire plus one billion lire in 5 per cent bonds).
• The Reichskonkordat was signed on 20 July 1933. Claims of a secret pre-1933 bargain and a Church oath of allegiance come from the polemical Secret Terrorist.
• On Pius XII, Cornwell’s “Hitler’s Pope” thesis, which he later partly moderated, stands against Pacepa and Rychlak’s claim of a KGB operation (“Seat 12”) launched through The Deputy.
• The Ambrosiano collapse, Calvi’s death in London (June 1982), the P2 list (1981) and Gelli’s conviction are documented. Williams’s CIA-Vatican-Mafia alliance and Rodriguez Guillen’s counterfeit scheme are the authors’ inferences.
• Yallop links John Paul I’s death to six men with financial motives; Cornwell concluded it was a pulmonary embolism.
• Ostpolitik under Casaroli opened negotiated relations with communist states from 1964.
• Diabolical and Keshe both frame the modern Vatican as a power structure. Keshe’s claims about war financing, Libyan gold and Brexit appear in no other source used here [#378134, #378019].