Eight people have been rescued off the coast of Devon from a tug which is carrying 200 tonnes of diesel.
The tug, which was travelling from Germany to Turkey, was damaged by a vessel it was towing as it tried to anchor a mile off Hope's Nose in Torbay around 7pm on Sunday night.
A salvage operation to prevent the boat from sinking and leaking the fuel onto the nearby tourist beaches has begun with the help of two naval ships.
Christos 22 had pulled into the coastline in order to check a problem with the tow when it was hit and began taking on water rapidly. The Moto Vessel Emsstrom, the decommissioned vessel being towed by the tug, became separated but has now been secured.
Torbay Life Boat and Exmouth Life Boat were the first to respond to a May Day call, rescuing six of the eight crew who were unhurt. The master in chief of the tug and the engineer later boarded two Royal Navy ships which have begun a salvage operation to stop the boat from sinking.
The watch manager at Brixham Coastguard praised the efforts of HMS Severn and HMS Lancaster, whose quick response is likely to save the boat he added.
The operation is ongoing with the support of two tugs, one form Brixham and one form Portland, who are pumping water off the stricken boat.
A Brixham Coastguard spokesman said: "The problem is this is happening quite close to shore and if this boat sinks there could be a big pollution problem. There is a lot of diesel on the boat, and there's a good chance the diesel would leak if it sinks.
"It would contaminate the local beaches - all this part of the coast is a holiday coastline. It is also a fishing area and would impact on the local birds and wildlife."
He added that if the boat cannot be saved the Royal Navy ships will instead begin the "difficult" task of pumping diesel out of the water.