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"If the pirates want peace, they had better release the tanker," Sheikh Ahmed, a spokesman for the Shebab group in the coastal region of Harardhere, told AFP by phone.
The Sirius Star, a huge tanker carrying around 100 million dollars worth of crude oil and owned by Saudi Aramco, was hijacked in the space of 16 minutes by Somali pirates in the Indian Ocean on November 15.
Pirates have since anchored it off their base in Harardhere, north of Mogadishu, and demanded the ransom be paid by November 30.
The Shebab (youth) armed group, which controls much of southern and central Somalia and rejects an internationally-backed peace process, has positioned fighters in and around Harardhere in recent days.
Islamist leaders have stressed that piracy is a capital offence under Islam and officially condemned the surge in acts of piracy in Somalia's waters, which has begun to disrupt international trade.
A member of the pirate group holding the Sirius Star retorted that his own men were not afraid of the Shebab's threats.
"We are the Shebab of the sea and we cant be scared by the Shebab of the land," Mohamed Said told AFP. "If anybody attempts to attack, that would be suicide."
Said announced to AFP on Thursday that his group was demanding 25 million dollars to release the vessel, which is carrying the equivalent of almost a quarter of top producer Saudi Arabia's daily output.
"I am not on the tanker at the moment because I am coordinating what is happening on the ground," he said. "There is a small Shebab vanguard on the ground but we also have a strong presence.
"Every Somali has great respect for the holy kingdom of Saudi Arabia. We have nothing against them but unfortunately what happened was just business for us and I hope the Saudis will understand," the pirate said.
Some residents in Harardhere have argued however that the Shebab are divided over the issue of piracy and that some of the Islamist fighters have moved into the region only to claim a share of the ransom.
Members of the pirate group told AFP on Saturday that talks were underway with Saudi Aramcos shipping arm and assured that the crew would not be harmed but added that no breakthrough had yet been achieved.
Yet he warned against any plan by Saudi Arabia or foreign navies patrolling the region to free the ship by force.
"I hope the owner of the tanker is wise enough and wont allow any military option because that would be disastrous for everybody. We are here to defend the tanker if attacked," Abdiyare Moalim said.
The capture of the Sirius Star, the biggest ship ever hijacked, and its oil cargo, has sowed panic in the shipping world, with companies now re-routing deliveries via the Cape of Good Hope, around the tip of South Africa, adding substantial time and transit costs.
With close to 100 attacks on ships in the Gulf of Aden and Indian Ocean this year, the pirates are threatening to choke one of the world's busiest maritime trade routes.
World leaders have condemned the surge in piracy and rushed extra navy ships to Somalia's waters in bid to curb the attacks.
But the international community and the shipping industry alike have acknowledged that the problem could never be completely resolved without an improvement of the situation inside Somalia.
The transitional government in Somalia is on its last legs and is incapable of reining in the pirates and offering alternative sources of income to the communities supporting the coastal ransom-hunters.
Pirates operating from Somalia have reinvested significant amounts from their ransoms into improving their equipment.
They currently hold at least 17 ships, including a Ukrainian cargo carrying 33 combat tanks destined for South Sudan.