Uranua1, not authoritarian? What about this? -
http://atheism.about.com/b/2007/07/13/authoritarian-church-denies-other-...

Although, most of the google searches I did resulted in links stating that Vatian City was autocratic. I suppose it can be an example of how such a state can have a positive impact on its neighbours - but nb: an importangt distinguishing factor is its size (a couple of blocks, as you say) - smaller countries are easier to govern (or control, if you will), esp if the citizens are of one mind - well, almost, save for the rumblings of discontent about certain issues which now have to be more transparent.

The problem is in multi-racial/multi-ethnic/multi-religious societies, which is almost everywhere. For the leadership of the country not to respect its people's differences and manage that for mutual respect, is a disaster waiting to happen. The onus is on the stronger party to take the first step/lead.

“Relationships-of all kinds-are like sand held in your hand. Held loosely, with an open hand, the sand remains where it is. The minute you close your hand and squeeze tightly to hold on, the sand trickles through your fingers. You may hold onto some of it, but most will be spilled. Held loosely, with respect and freedom for the other person, it is likely to remain intact. But hold too tightly, too possessively, and the relationship slips away and is lost.”

http://thinkexist.com/quotation/relationships-of_all_kinds