MOGADISHU (Reuters) – Somali elders sought to mediate on Saturday between the U.S. navy and pirates holding an American hostage in a high-seas standoff that presents President Barack Obama with a nasty new dilemma.

Four pirates adrift in a lifeboat far out in the Indian Ocean with Richard Phillips, the 53-year-old American captain of a cargo ship they tried to seize on Wednesday, have demanded $2 million for his release and a guarantee of their own safety.

With three U.S. warships in the area, the elders and relatives of the pirates holding Phillips, a father-of-two from rural Vermont, are planning a mediation mission to try to avoid bloodshed, a regional maritime group said.

“They are just looking to arrange safe passage for the pirates, no ransom,” group coordinator Andrew Mwangura said.

French special forces stormed a yacht held by pirates elsewhere in the lawless stretch of the Indian Ocean on Friday in an assault that killed one hostage, but freed four.

Two pirates were killed and three captured.

On Saturday pirates seized another vessel, a U.S.-owned, Italian-flagged tugboat with 10 Italians among its 16-member crew, NATO alliance officials on a warship in the region said.

Earlier, attackers fired a rocket-propelled grenade into the cabin of the commanding officer of another ship in the Gulf of Aden between Somalia and Yemen. They also fired bullets.

The grenade did not explode and the ship’s crew managed to repel the attackers with water hoses, the NATO officials said.

A U.S. military official said the destroyer USS Bainbridge was near the lifeboat and had been joined by the USS Boxer, the flagship of a U.S.-led multinational counterpiracy task force.

The Boxer, which has a crew of about 1,000 and can carry around 2,000 U.S. Marines, is equipped with a hospital and dozens of attack planes and helicopters.

The guided missile frigate USS Halyburton is also nearby.

“VERY DETERMINED GUY”

At one point, Phillips tried to escape the lifeboat by jumping overboard, but was quickly recaptured.

Relatives and friends told the New York Times he was a generous, wryly funny but “very determined guy” who played the saxophone and did household chores when not at sea.

The military official, who spoke on condition of anonymity, said crew members from the USS Bainbridge had seen Phillips moving and talking aboard the life boat after his failed escape.

The Bainbridge launched monitoring drones and kept radio contact with the pirates. A U.S. official said it was seeking a peaceful outcome and FBI experts were providing advice.

“What continues to be our No. 1 priority is the safe and healthy return of the captain,” said Pentagon spokesman Marine Corps Major Stewart Upton.

Pirates on a German 20,000-tonne container vessel with 24 foreign hostages gave up an attempt to use the ship as a “shield” to reach the lifeboat holding Phillips.

“We have come back to Haradheere coast. We could not locate the lifeboat,” one pirate on the German ship the Hansa Stavanger, who identified himself as Suleiman, told Reuters.

Relatives of Phillips have said he volunteered to get in the lifeboat with the pirates in exchange for the safety of his crew, who regained control of the 17,000-tonne, Danish-owned Maersk Alabama, on Wednesday.

The ship, carrying food relief to Kenya, was due into Kenya’s Mombasa port late on Saturday.

Phillips is one of about 260 hostages being held by Somali pirates preying on the busy sea lanes of the Gulf of Aden and the Indian Ocean.

There are more Filipinos than any other nationality and the pirates are keeping about 17 captured vessels at or near lairs like Eyl, Hobyo and Haradheere on Somalia’s eastern coast — six of them taken in the last week alone.

“Once again, it has taken American involvement to get world powers really interested,” said a diplomat who tracks Somalia from Nairobi. “I hope they don’t forget the Filipinos and all the others, once this guy is released.”

The standoff has forced Obama to focus on a place most Americans would rather forget. Perched on the Horn of Africa, Somalia has suffered 18 years of conflict since warlords toppled dictator Mohamed Siad Barre in 1991.

Americans remember with a shudder the disastrous U.S.-U.N. intervention there soon after, including the infamous “Black Hawk Down” battle in 1993 when 18 U.S. troops were killed in a 17-hour firefight that was later made into a hit movie.

DEFIANT

The gang holding Phillips remained defiant despite the arrival of U.S. and other naval ships close. “We will defend ourselves if attacked,” one told Reuters by satellite phone.

Somalia’s Islamist insurgent movement al Shabaab, which is on Washington’s list of terrorist organizations, lambasted the international naval patrols and said no money should be paid.

“You are the ones who are the pirates. Leave our waters. You will be defeated, whatever you can do. And you will regret anything you pay as a ransom,” al Shabaab spokesman Sheikh Muktar Robow Mansoor told reporters.

Al Shabaab has denied any links with the pirates.

In France, the government stood by its raid to free the yacht, which was hijacked en route to Zanzibar last weekend with two couples and a 3-year-old child aboard.

“During the operation, a hostage sadly died,” said French President Nicolas Sarkozy’s office. But it said the president “confirms France’s determination not to give in to blackmail and to defeat the pirates.”

Last year there were 42 ship hijackings off Somalia, which disrupted shipping, delayed food aid to East Africa and raised insurance costs. Some cargo ships have been diverted to travel around South Africa instead of through the Suez Canal.

(Additional reporting by Abdi Sheikh and Mohamed Ahmed in Mogadishu, Abdiqani Hassan in Bosasso, Daniel Wallis in Mombasa, Alison Bevege on board the NRB Corte-Real, Andrew Gray and Anthony Boadle in Washington, William Maclean in London and Andrew Cawthorne in Nairobi; writing by Andrew Cawthorne; editing by Philippa Fletcher)