HARARE (Reuters) - Zimbabwe will not invite election observers from Western countries to monitor a presidential run-off unless they remove sanctions, state media said on Monday, rejecting opposition demands.

Justice Minister Patrick Chinamasa said Zimbabwe would not bow to pressure to invite election monitors from Western countries and the United Nations.

"We will not allow them ... We will think favourably of them if they lift sanctions," the state-run Herald newspaper quoted him as saying. "Until they do that, there is no basis to have any relationship with them."

After weeks of equivocation, opposition leader Morgan Tsvangirai said at the weekend he would contest the run-off against Robert Mugabe even though he believes he won outright in the first round and accuses the ruling ZANU-PF of vote-rigging.

Tsvangirai's Movement for Democratic Change (MDC) said he would return home to deal Mugabe a "final knock-out" after almost three decades in power.

But Tsvangirai said he would only stand if international observers and media were given full access to ensure the vote is free and fair.

Zimbabwe's government rejected any conditions for the run-off, but has previously allowed in election monitors from regional group SADC.

Only one European country -- Russia -- was invited to observe the March 29 poll. Diplomats accredited in Zimbabwe were the only other Western observers allowed to monitor the vote.

The standoff has dashed hopes that the election will bring relief to millions of Zimbabweans suffering severe food, fuel and foreign currency shortages and the world's highest inflation rate of 165,000 percent.

Mugabe blames Zimbabwe's economic collapse on Western sanctions, which have failed to weaken him. Western countries say the limited measures are designed only to target Mugabe and his top officials.

The MDC said it had stepped up efforts to secure SADC peacekeepers for the run-off after weeks of violence that intimidated voters.

A former guerrilla leader, Mugabe has ruled Zimbabwe since independence from Britain in 1980. The West and rights groups accuse him of human rights violations and wrecking the economy, but he is viewed as an independence hero by many in Africa.

Official results showed ZANU-PF lost its parliamentary majority for the first time in the elections, and that Tsvangirai beat Mugabe in a parallel presidential poll, but not by enough votes to avoid a run-off. Both the government and opposition have challenged some of the results.