NAIROBI, Sept 11 (Reuters) - A maritime watchdog said on Wednesday there were indications Somali pirates were freeing a Japanese-operated chemical tanker after a ransom payment.

"It looks like it is in the process of being released," Andrew Mwangura, of the East African Seafarers' Assistance Programme, said of the MT Irene that was seized on Aug. 21.

Irene, registered in Panama but managed from Japan, is one of a dozen boats held by pirates operating from lawless Somalia and plying the Gulf of Aden, a major sea artery used by some 20,000 vessels a year heading to and from the Suez Canal.

The ship has a crew of 15 Filipinos and three Croats, Mwangura said. "We understand the gang were demanding about $2.47 million ransom. Maybe they got less, I don't know. They are certainly making a lot of money," he said.

Heavily-armed Somali gunmen, usually using speedboats and now also boasting a French yacht they have captured, have seized more than 30 vessels in total so far this year.

The frenzy of hijackings has made the waters off the Horn of Africa nation the most dangerous in the world.

The violence at sea has escalated as Islamist insurgents fight against the interim government in Mogadishu and their Ethiopian military backers in the latest upsurge of violence in Somalia's 17-year-old civil conflict.

Mwangura's group says it has been telling shipping companies for years not to pay ransoms, but many were doing so, fuelling a now lucrative and spiralling trade. (Reporting by Andrew Cawthorne; editing by Andrew Roche)

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