* Britain says it wants unity government to succeed * No direct assistance to government yet * U.S. demands Mugabe stop harassing opposition (Corrects Canning's first name, paragraph 2; Fish's job title, 8) By Nelson Banya HARARE, Oct 15 (Reuters) - Britain said on Thursday it was providing $100 million in aid to Zimbabwe this year, its largest ever donation to the country, to help the new unity government and ease a grim humanitarian crisis. "We thought the formation of the inclusive government was a significant step. The UK wants it to succeed. We are not holding back and will be supporting it to the tune of $100 million this year," said British ambassador to Zimbabwe Mark Canning. "We don't want it to fail as a result of lack of financial support," he told reporters. Relations between Britain and Zimbabwe have been strained for a decade, with London accusing President Robert Mugabe of disastrous policies such as the often violent seizure of white farms to resettle blacks, electoral fraud and rights abuses. But the formation of a power-sharing government by Mugabe and rival Prime Minister Morgan Tsvangirai has raised hopes for improved ties. Canning said the funds would be used to restore vital services such as water, sanitation, healthcare and education -- which has virtually collapsed after years of neglect -- as well as to provide food aid, seed and fertilizers to poor households. Western donors have been reluctant to give large-scale development aid to Zimbabwe until they see more evidence of reforms being implemented. Dave Fish, head of the Africa Division of Britain's Department for International Development, said Britain was not yet giving direct funding to the new unity government. "We would expect significant developments on the political front before we deepen support or even provide funding directly through the government," he said. "We expect respect for human rights and international obligations, policies that help the people and the ability to manage donor funds transparently. In those three cases, Zimbabwe failed the test." The unity government has faced problems from the start, with Tsvangirai's Movement for Democratic Change (MDC) accusing Mugabe of undermining the pact by refusing to reverse senior appointments made without consulting the former opposition. Wednesday, Tsvangirai's ally Roy Bennett was detained after being indicted on terrorism charges, prompting an angry response from the MDC, which says its members are being persecuted through the courts. 'HARASSMENT' In Washington, the U.S. State Department blasted Mugabe for the charges against Bennett and said it had no plans to give the government development aid, although it would keep giving humanitarian aid to the people. "This particular case with regard to Roy Bennett is frankly a blatant example of the absence of rule of law in Zimbabwe and, frankly it's a transparent attempt to prevent Mr. Bennett from taking up his position as deputy secretary for agriculture," said State Department spokesman Robert Wood. "Mugabe needs to end his harassment of the opposition, including Mr. Bennett," he told reporters. Mugabe's ZANU-PF party accuses the MDC of failing to honor an agreement to call for the removal of sanctions imposed by Western governments on the veteran leader and his inner circle. Mugabe has accused the West of trying to divide the unity government through the maintenance of the sanctions, adding they hurt only the poor. Canning said the full restoration of ties with Zimbabwe depended on the implementation of the power-sharing deal and the successful completion of current talks between Harare and the European Union. "It is the progress on the ground that will determine the extent to which we increase co-operation," Canning said. "The issue of sanctions is one that will go away once the political agreement is fulfilled in spirit and letter." (Reporting by Nelson Banya; editing by Andrew Roche)
