Three Somali pirates were shot dead in an apparent argument with their mates aboard a hijacked Ukrainian cargo ship carrying tanks, the Itar-Tass news agency reported on Tuesday.

None of the 20 crew being held hostage on the freighter Faina were injured in the exchange of fire stemming from a alleged dispute between the pirates, according to a Moskovskiy Bulletin news report.

The cargo ship remained anchored near the island of Hobyo off the Somali coast. There was no damage reported to the vessel's cargo, including depleted uranium anti-tank shells, armoured personnel carriers, and 33 T-72 tanks.

Three US Navy warships were on the scene and US helicopters were overflying the Belize-registered Faina. The USS Howard, a minesweeper, was leading the monitoring operation.

The US destroyer USS Howard and the Russian frigate Neustrashniy were en route as reinforcements, according to news reports.

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

US naval officials on Monday said the tanks and ammunition had been destined for an as-yet unnamed group in South Sudan. An un-determined number of armoured personnel carriers also is aboard, according to Ukrainian media reports.

Ukrainian government officials have said the shipment was a legitimate state-to-state arms delivery from Ukraine to Kenya. Tomax Team Inc, an Odessa-based shipping company, is the Faina's operator.

Seventeen Ukrainians, two Russians, and one Lativian national were known to be held hostage aboard the Faina. A third Russian, the ship's former captain Vladimir Kolobkov, died on Sunday from a stroke, Ukraine's Channel 5 television reported.

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 pirate spokesman, told Deutsche Presse-Agentur dpa by satellite phone on Monday.

Piracy is rife in the Gulf of Aden - a strategic shipping route off Somalia - with over 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 two ships - Japanese vessel the MV Stella Maris and Malaysian tanker the MT Bunga Melati 5 - although ransoms of several million dollars are believed to have been paid.