Negotiations are taking place by phone to free a Ukrainian ship hijacked by Somali pirates with 33 tanks and other military hardware abroad, a maritime official said on Wednesday.

The gunmen have demanded $20 million to release the MV Faina, seized in a hijacking last week that has thrown an international spotlight on rampant piracy in one of the world's busiest shipping areas.

'The negotiations between the Ukrainian owners and the pirates are still going on over the phone,' said Andrew Mwangura, an official of the East African Seafarers Assistance Program.

'It will take a while because the Ukrainian company may not pay all the money.'

US navy ships are watching the boat, whose capture has also raised questions over the destination of its cargo. Kenya says the T-72 tanks, grenade-launchers and ammunition were for its military but the U.S. navy believes they were headed for south Sudan via the port city of Mombasa.

Taking advantage of chaos on shore, where an Islamist-led insurgency has raged for nearly two years, Somali pirates have seized more than 30 ships this year and attacked many more.

Most attacks have been in the Gulf of Aden between Yemen and north Somalia, a major global sea artery used by about 20,000 vessels a year heading to and from the Suez Canal.

The pirates denied reports that three of them had been killed on Tuesday in a shootout between rivals arguing over what to do with the ship.

Mwangura said the ship was owned by a Panama-based firm and managed by the Ukrainians.

There are 20 crew on board after one Russian died of illness. Most of the crew are Ukrainians, with two Russians and a Latvian.-Reuters