The presence of international warships has provoked a gunbattle that led to three Somali pirates being shot dead aboard a hijacked Ukrainian cargo ship carrying tanks, a maritime official said Tuesday.

"There was a shootout because of a misunderstanding between the gunmen," Andrew Mwangura of the East African Seafarers' Assistance Programme told Deutsche Presse-Agentur dpa.

"They are paranoid about the presence of (international) warships," said Mwangura, whose Kenya-based organization monitors acts of piracy off Somalia.

"Some of them want to bail out or abandon the mission and others are ready to continue," he added.

None of the 20 crewmembers being held along with the ship were believed to have been injured in the fighting.

The MV Faina, along with its cargo of 33 T-72 tanks, armoured personnel carriers and munitions, was seized late Thursday as it headed for the Kenyan port of Mombasa.

The ship, with an estimated 50 pirates onboard, is now surrounded by warships at its anchorage point off the Somali coast near the port of Hobyo.

Lieutenant Nathan Christensen, deputy spokesman for the US Navy's fifth fleet, said that three warships, amongst them the USS Howard, were maintaining visual contact and that there were no plans to launch an assault on the hijacked vessel.

One of the other ships is believed to be Russian and the identity of the third is unknown. A US helicopter gunship is also monitoring the pirates.

The major response is due to fears that the military cargo may fall into the hands of Islamists currently waging a bloody insurgency against the transitional federal government in Somalia.

A pirate spokesman said any international attempt at military action to free the hostages would result in their death.

"If any warships attack, nobody on the ship will live: either we will all survive or we will all die," Sugale Ali, a spokesman for the pirates, told dpa by satellite phone on Monday.

The pirates have demanded a ransom of 20 million dollars to release the cargo ship and its crew.

Seventeen Ukrainians, two Russians, and one Latvian were being held hostage aboard the Faina.

A third Russian, the ship's former captain Vladimir Kolobkov, died on Sunday, the ship's deputy captain Viktor Nikolsky told dpa.

There has also been confusion over the final destination of the military cargo.

Kenyan government spokesman Alfred Mutua insists the equipment is for use by the Kenyan military, but the US Navy, the pirates and other officials say the equipment is destined for South Sudan.

"According to my information, the shipment is going to south Sudan," Mwangura said. "This is the fourth or fifth such shipment to come through Kenya."

North and South Sudan have maintained a fragile peace since 2005, although recent tensions in the town of Abyei brought the two sides close to war again.

Should the shipment prove to be headed for South Sudan, the prospects for long-term peace could be dealt another blow.

Ukrainian government officials have said the shipment was a legitimate state-to-state arms delivery from Ukraine to Kenya.

Piracy is rife in the Gulf of Aden - a strategic shipping route off Somalia - with around a dozen ships currently in the hands of armed groups, the latest victim being a Greek vessel seized Saturday.

Two other pirated vessels, MV Capt Stefanos and MV Centauri, are also anchored in the same location as the Ukrainian ship, the US Navy said.

However, pirates have over the past few days released three ships - Japanese vessel the MV Stella Maris and Malaysian tankers the MT Bunga Melati 2 and the MT Bunga Melati 5 and - although ransoms of several million dollars are believed to have been paid.