Indonesia has refused Chinese demands that it release eight fishermen arrested for illegal fishing, and accused China of sharply raising tensions in the region by rescuing their seized boat.

Tensions flared after an Indonesian Fisheries Ministry patrol ship intercepted the Chinese fishing vessel on Saturday off the Natuna islands, which overlap the southernmost reaches of the South China Sea, according to Indonesian officials.

A Chinese coast guard vessel collided with the fishing boat, the Kway Fey, as it was being towed, allowing it to escape.

Security Minister Luhut Pandjaitan said Wednesday that the eight crewmen will be prosecuted. The government official in charge of maritime security, Arif Havas Oegroseno, said China's action had created "a new ball game" that Southeast Asian countries need to follow closely.