We present 0 \aas@@fstack { \prime \prime } 5 resolution ALMA detections of the observed 246 GHz continuum , [ C I ] ^ { 3 } P _ { 2 } \to ^ { 3 } P _ { 1 } fine structure line ( [ C I ] 2–1 ) , CO ( 7–6 ) and H _ { 2 } O lines in the z = 2.161 radio galaxy MRC1138-262 , the “ Spiderweb Galaxy ” . We detect strong [ C I ] 2–1 emission both at the position of the radio core , and in a second component \sim 4 kpc away from it . The 1100 km/s broad [ C I ] 2–1 line in this latter component , combined with its H _ { 2 } mass of 1.6 \times 10 ^ { 10 } M _ { \odot } implies this emission must come from a compact region < 60 pc , possibly containing a second AGN . The combined H _ { 2 } mass derived for both objects using the [ C I ] 2–1 emission is 3.3 \times 10 ^ { 10 } M _ { \odot } . The total CO ( 7–6 ) / [ C I ] 2–1 line flux ratio of 0.2 suggests a low excitation molecular gas reservoir and/or enhanced atomic carbon in cosmic-ray dominated regions . We detect spatially-resolved H _ { 2 } O 2 _ { 11 } -2 _ { 02 } emission — for the first time in a high- z un-lensed galaxy — near the outer radio lobe to the east , and near the bend of the radio jet to the west of the radio galaxy . No underlying 246 GHz continuum emission is seen at either position . We suggest that the H _ { 2 } O emission is excited in the cooling region behind slow ( 10-40 km s ^ { -1 } ) shocks in dense molecular gas ( 10 ^ { 3 - 5 } cm ^ { -3 } ) . The extended water emission is likely evidence of the radio jet ’ s impact in cooling and forming molecules in the post-shocked gas in the halo and inter-cluster gas similar to what is seen in low- z clusters and other high- z radio galaxies . These observations imply that the passage of the radio jet in the interstellar and inter-cluster medium not only heats gas to high temperatures as is commonly assumed or found in simulations , but also induces cooling and dissipation which can lead to substantial amounts of cold dense molecular gas . The formation of molecules and strong dissipation in the halo gas of MRC1138-262 may explain both the extended diffuse molecular gas and young stars observed around MRC1138-262 .