(Adds aid agency, speaker's plea to Ethiopia)

By Abdiqani Hassan

BOSASSO, Somalia, Dec 1 (Reuters) - Somali pirates have agreed to release a Yemeni cargo ship without ransom after successful negotiations between the hijackers, local elders and a Yemeni official, a local official said on Monday.

"No ransom was paid, but after negotiations, the pirates will get off the ship soon. The Yemeni ship will be released in the coming hours," Ali Abdi Aware, state minister of the northern province of Puntland, told Reuters.

The MV Amani was seized on Nov. 25.

This year's surge in piracy in the Gulf of Aden and Indian Ocean off Somalia has seen insurance costs rise, brought millions in ransoms, and sent navies rushing to the area.

But attacks continue despite the presence of more than a dozen foreign warships. Pirates are holding more than a dozen ships, with nearly 300 crew members hostage.

In Kiev, Foreign Ministry spokesman Vasyl Kyrylych said talks to release a Ukrainian ship, the MV Faina, being held with 33 tanks on board, were nearing conclusion.

"What is important for us is that the talks are now in their final phase and what is particularly important is that the atmosphere remains satisfactory and that the state of health of the sailors remains satisfactory," he said.

"We expect the liberation of the hostages very soon," the spokesman added, without giving any more details.

The pirates had been demanding $8 million as ransom.

WAR FUELS PIRACY

Somalia's sea-gangs have taken advantage of chaos on the mainland to launch attacks offshore in some of the world's busiest shipping lanes connecting Asia and Europe.

A two-year Islamist-led insurgency against the government and its Ethiopian military allies has created a humanitarian crisis that aid workers say is one of the worst in the world.

The United Nations on Monday appealed for nearly $920 million to fund aid projects during 2009 in the Horn of Africa country. "The projection of those in need in Somalia is 3.2 million people, representing 40 percent of the total population," a U.N. statement said.

Aid workers have themselves been targeted this year.

In the latest incident, residents said Islamists in the southern port of Kismayu arrested a Kenyan doctor and six Kenyan-Somali teachers.

Two local aid workers were also arrested in Friday's sweep.

Regional analysts say the long-term solution to piracy in Somalia is through a functioning government with law enforcement agencies. But with Somalia's 14th attempt to create central government in 18 years going badly, some are sceptical.

"To expect a central government to emerge in Somalia any time soon is pie in the sky," said a report by international think-tank the Asia Pacific Foundation.

U.N.-brokered peace talks are being hampered by violence on the ground, disunity among government leaders and a boycott by hardline opposition groups.

Ramping up the pressure for a solution, Ethiopia has threatened to withdraw its several thousand troops in Somalia by the end of the year, raising the spectre of a power vacuum.

Parliamentary speaker Sheikh Aden Madobe pleaded with Addis Ababa to re-think, at least until an effective international peacekeeping force was in place.

The African Union has some 3,000 peacekeepers in Somalia, but is struggling to boost numbers. The United Nations is showing reluctance to take over following a failed intervention there in the early 1990s.

"We request Ethiopia not to withdraw at this moment of worst insecurity," Madobe said. "Ethiopia has helped us a lot and we ask them to stay until we receive peacekeeping forces." (Additional reporting by Mohamed Ahmed in Baidoa; Ron Popeski in Kiev; Writing by Wangui Kanina and Andrew Cawthorne)

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