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A pirate on board the vessel told Reuters earlier they were expecting to receive $3 million for the Marshall Islands-flagged 23,709 dwt cargo ship, which was seized in November. The crew included three Greek officers and the rest were Filipinos.

Helicopters dropped the agreed ransom aboard the vessel, Andrew Mwangura of the Kenya-based East African Seafarers Assistance Programme said. "She is now steaming out to safe waters. All crew members are said to be safe," he added.

"We took the money from the ship ... The ship started sailing and there's navy ships guarding it," said pirate Rage, adding the pirates were heading towards land on their own sailing boat to the pirate hideout of Hobyo.

The ship had been heading from Kuwait to Durban, South Africa, when it was attacked 500 miles northeast of the Seychelles.

As ransoms paid to Somali pirates spiral higher, competition between rival gangs has been growing. A dispute in January over the biggest ever payoff to Somali pirates for a Greek-flagged oil tanker sparked gun battles at sea and on land.

PIRATE ACTIVITY

Worldwide, piracy attacks rose nearly 40 percent in 2009, with Somali pirates accounting for more than half of the 406 reported incidents, according to the International Maritime Bureau. Typically, the pirates hold the captured ships and crews hostage until ransoms are paid.

While hijackings in the Gulf of Aden have tapered off, "pirate activity in the Somali basin has grown and grown exponentially", one EU naval official said last week.

U.N. officials say international naval operations and improved coordination have led to a decrease in the rate of successful pirate attacks and have raised the cost of pirate operations.

Somalia has had no effective central government since 1991, one of the reasons piracy has flourished. With the aid of African Union peacekeepers, its U.N.-backed transitional government is struggling to pacify an Islamist insurgency.

Since the start of 2007, the conflict has cost 20,000 civilian lives and uprooted more than 1.5 million people from their homes. The government is confined to a few small blocks of the capital Mogadishu and exerts little influence over the state.