The negotiations between Israel and the Vatican over the release of the convicted gun smuggler. Archbishop Hilarion Capucci, appear to have been instigated by the Israelis in an effort to bring about closer relations between the Jewish state and the church of Rome.

The Vatican has never formally recognized the state of Israel and its interests here are taken care of by an apostolic delegate rathern than a papal nuncio, who would have the higher rank equivalent of an ambassador.

According to the Ministry of Religious Affairs, the non-recognition of Israel stems from the 1947-48 period when the Vatican favored a United Nations resolution that called for the internationalization of the Holy City of Jerusalem. According to the ministry, the Vatican also tends to withhold recognition from states whose borders are not settled.

Israel's troubles with the Vatican go back to 1904 when the founder of modern Zionism, Theodore Herzl, met with Pope Pius X. The Pope told Herzl: "If you come to Palestine and settle your people there we will prepare churches and priests to convert them."

In recent years, the Vatican has put less emphasis on the internationalization of Jerusalem and has stressed instead international guarantees to preserve the "universal and sacred character" of the holy city.

The Vatican has few complaints to make about Israel's handling and care of the Christian holy places. Except for Nazareth and the Galilee, most of the sites associated with the life of Christ were captured from the Jordanians in the 1967 war.

But the Israelis feel that the Vatican has never been happy with the fact that the Jews are now masters of Jerusalem.

However, Jerusalem's Mayor Teddy Kollek, who enjoys good relations with the Christian community here, once said that the Vatican was less interested in the concept of an international city today than it was in 1947. In those days, before the breakup of the European empires in Africa and Asia, the Catholic countries were heavily represented in the United Nations because of South America. Now that the Third World is less Catholic than before, the internationalization of Jerusalem might bring less respect and care for the Christian holy places and care for the Christian holy places than the Israelis now provide, Kollek said.

There have been several meetings between Popes and Israeli leaders in the years since 1948, and in 1964 Pope Paul visited Nazareth and Israel's president and the prime minister.

Golda Meir was the first prime minister to have an official audience with the Pope in Rome, in 1969. Later they tangled over Israeli treatment of the Arabs and the audience seemed to symbolize the uneasy relationship between the Vatican and Israel that exists even now.

From Israel's point of view, the Nostra Aetate of 1965, which came out of the Second Vatican conference under Pope John XXIII, was a step forward in Jewish-Catholic relations. The Nostra Aetate absolved the Jews, past and present, from any responsibility for the death of Christ and said that Jews and Christians should move closer to each other. There was no mention of the state of Israel, however.

A step backward, from Israel's viewpoint, was taken at the Habitat conference held in Canada in 1976. There the Vatican representative backed a clause that supported the famous U.N. resolution of the year before equating Zionism with racism.

And so the impending release of Greek Catholic Archbishop Capucci can be seen against the backdrop the uneasy relationship that has existed between the Israel and the Vatican since 1948 and between the Jewish people and the Vatican for more than a thousand years.