Chief engineer Peter French, from County Durham, and second officer James Grady, from Strathclyde, are among 25 people being held on the tanker Sirius Star. A foreign news agency reported that the pirates have demanded 25 million dollars (£16.6m) for the hostages' safe release.

Foreign Secretary David Miliband said payments were, "only an encouragement to further hostage-taking".

His Saudi counterpart Prince Saud Al-Faisal said ship owners Vela International were in talks with the pirates.

"We do not like to negotiate with either terrorists or hijackers,"

But, he added: "The owners of the tanker are the final arbiters of what happens there."

Vela would not confirm the ransom figure and maritime security experts said the true figure was likely to be much higher.

A spokesman for the Foreign Office said British policy was not to negotiate with hijackers but conceded that the Sirius Star, "is not a British ship".

"I cannot say if we have been contacted (by the pirates) or not. That is not something we can get into discussing," he said.

Also yesterday the United Nations approved a British proposal to impose new sanctions against Somalia in a bid to cut off the pirate gangs.

It also called on the UN Security Council to recommend the freezing of assets of individuals and organisations.

The Sirius Star was attacked at the weekend 420 nautical miles off the coast of Somalia and the pirates who have taken control of the vessel have taken it to a stronghold near the town of Eyl.

The 1,080ft long ship was fully laden with two million barrels of oil when pirates boarded it and is the largest vessel ever to be hijacked in a region which has become notorious for piracy.

Mr Miliband said yesterday he was "extremely concerned" and called on the international community to "stand firm" against hostage-taking in all its forms.

He said: "There is a strong view of the British Government, and actually the international community, that payments for hostage-taking are only an encouragement to further hostage-taking.

"We will be approaching this issue in a very delicate way, in a way that puts the security and safety of the hostages to the fore."

He insisted the planned deployment of a European force was the correct course of action.

Mr Miliband said: "It is very important that the international community stands firm against the scourge of hostage-taking, whether it is on boats, whether it is on airlines, or elsewhere.

"All of our hearts go out to all of those people who are now hostages on that ship, obviously in our case especially for the two British hostages.

"Their families will be going through a wrenching hell of waiting.

"It is important we assure them we are fully engaged with all of our partners on this issue."

Downing Street said the Government was currently in discussions with other European states about the prospects of establishing an EU anti-piracy mission to take over from the current Nato force in the area.

The Prime Minister's spokesman said Britain was offering to host the mission headquarters as well as providing a Royal Navy frigate.

The Royal Navy frigate HMS Cumberland is currently operating as part of the Nato force.

Also yesterday Egypt hosted an emergency meeting of six Arab countries to try to secure the vital trade route through the Gulf of Aden – not far from where the Sirius Star was taken.

They want to forge an alliance with other Arab navies to patrol the area.