Last week fierce clashes broke out between the kidnappers and government forces, triggering the threat from the group to kill one or more of the aid workers unless the military pulled back.

With the Abu Sayyaf now reiterating its threat to behead one of their captives, Al Jazeera's Marga Ortigas, reporting from Manila, said that both sides seem unwilling to compromise.

The Red Cross workers have been held in southern Jolo island for over two months [EPA]
"The goverment is saying that it is logistically impossible to move as many forces out of the area as the Abu Sayyaf would like," she said. "But the fighters say that it is all or nothing."

She said there was speculation that kidnapper's latest demand may be seen as an attempt by the Abu Sayyaf to reposition itself in the area.

The Abu Sayyaf fighters holding Eugenio Vagni, an Italian national, Andreas Notter, from Switzerland and Mary Jean Lacaba, a Filipino, insist that troops must withdraw from the entire island into just two villages near the provincial capital.

"They're insisting on a total pullout,'' Abdusakur Tan, the governor of Sulu, told the
Associated Press on Sunday after talking to Albader Parad, an Abu Sayyaf commander.

'Impossible' demand

A day earlier Ronaldo Puno, the Philippines interior secretary told reporters the government agreed to pull back troops from Indanan township, near the Abu Sayyaf positions.

The military has twice agreed to pull back forces to give the fighters 130sq km of jungle to manoeuvre near Indanan.

But Tan said the Abu Sayyaf wanted all of Jolo's troops, police and militiamen to be restricted to two villages, a demand he called "impossible".

The Abu Sayyaf group has been blamed for a string of high-profile kidnappings and bomb attacks, including the 2004 bombing of a passenger ferry that killed over 100 in Manila Bay.

It has kidnapped dozens of foreigners, businessmen and religious workers over the past decade and is on the US government's list of foreign terrorist organisations.