* Mugabe says opposition must drop claim to power

* Mugabe warns neighbours against provoking a fight

By MacDonald Dzirutwe

HARARE, July 4 (Reuters) - President Robert Mugabe said on Friday that although he accepted the need for negotiations to end Zimbabwe's crisis, the opposition must drop their claim to power and accept that he was the country's leader.

Returning home after an African Union summit in Egypt that called on Tuesday for him to open negotiations with the opposition of Morgan Tsvangirai, Mugabe struck a tough line.

"Tsvangirai and his group must disabuse themselves of their claim (to power), he said, adding: "We are open to dialogue but reality is reality and it has to be accepted... I am the President of the Republic of Zimbabwe."

Mugabe, met by thousands of cheering supporters at the airport, insisted that Zimbabwe's crisis, which has ruined the economy and sent millions of refugees into neighbouring states, must be settled internally.

"We are happy that the AU accepted the position that the Zimbabwean problem must be resolved by Zimbabweans through negotiations."

The AU summit in the resort of Sharm el-Sheikh issued a resolution on Tuesday calling for talks leading to a national unity government.

Despite unprecedented African criticism both before and during the summit, Mugabe seemed unchastened. In an apparent reference to tough criticism from Botswana and Zambia he warned neighbouring states about picking a fight with Zimbabwe.

"If there are some who may want to fight us, they should think twice. We don't intend to fight any neighbours. We are a peaceful country, but if there is a ...neighbouring country that is itching for a fight, ah, then let them try it."

Mugabe was re-elected in a June 27 presidential election which was condemned both inside and outside Africa after Tsvangirai withdrew because of violence which he said had killed 86 of his supporters.

Tsvangirai has rejected talks until government-backed violence against his supporters ends. He says Mugabe's ZANU-PF party must accept him as the rightful election winner, after a first round poll in March in which he defeated the veteran president. (Writing by Barry Moody, additional reporting by Paul Simao in Johannesburg) (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com/)

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