See code is cracked by European (7)
I believe the answer is:
diocese
'see' is the definition.
(both can mean a bishop's associated area)
'code is cracked by european' is the wordplay.
'cracked' indicates anagramming the letters.
'by' means one lot of letters go next to another.
'european' becomes 'E' (abbreviation e.g. EU).
'code'+'is'='codeis'
'codeis' is an anagram of 'dioces'.
'dioces'+'e'='DIOCESE'
(Other definitions for diocese that I've seen before include "District under a bishop's jurisdiction" , "Bishop's area" , "Church district" , "I see cod (anag)" , "District under a bishop's authority" .)