By Peter Blackburn

BRUSSELS, March 10 (Reuter) The European Union responded angrily on Friday to the seizure by Canada of a Spanish fishing boat in international waters, demanding its release and calling for retaliatory measures to be drawn up.

Canadian vessels chased down and fired on the Spanish vessel on Thursday before capturing it and towing it to Canada in a dispute over fish stocks.

EU ambassadors decided at an emergency meeting on Friday to order the European Commission, the EU's executive, to draw up a list of retaliatory action by the beginning of next week.

"It does not exclude any measure," Commission spokesman Joao Vale de Almeida said.

In a strongly worded statement, the ambassadors demanded that Ottawa immediately release the Spanish vessel, calling the seizure "an illegal and totally unacceptable act".

Almeida said EU fishermen were not violating international law and they had every right to fish in those waters and to remain there.

In addition, the EU froze a scientific cooperation agreement with Canada which was to have been approved by EU research ministers on Friday.

Canada's ambassador to the EU, Jacques Roy, criticised the move. "It's disappointing that the EU has taken measures which have nothing to do with fishing," he said.

Canada was prepared to negotiate but only on condition that fishing stop in the disputed zone during the talks, he added.

During the incident on Thursday, a Canadian gunboat fired four bursts of warning shots across the bow of the Spanish vessel, the Estai, before an armed boarding crew arrested the ship's master and towed the boat towards the Canadian province of Newfoundland.

The European Commission called the move "piracy" and a flagrant violation of international law.

In Madrid, Spain said it had sent a naval ship to the North Atlantic to back its beleaguered fishermen.

A Spanish minister on Friday demanded EU sanctions against Canada for seizing the boat.

"It is quite impossible that any country should allow itself the luxury of machine gunning a boat fishing in international waters," said Xoan Caamano, fisheries minister of the northern Spanish region of Galicia, home of the Estai.

Portugal, which has fishing boast in the disputed area, also protested. Minister for Maritime Affairs Eduardo Azevedo Soares said the fishing boats were "the victim of an act of gross disrespect for international rules and for the climate of harmony which should reign in international waters".

Canada said the action outside its legal territorial limits was an attempt to conserve threatened stocks of of Greenland halibut, also known as turbot.

Roy said that Canada was engaged in a race against time to protect the last groundfish stock in the northwest Atlantic.

"This is the main battle," he said.

The seizure is the part of a simmering fishing dispute that

erupted after the EU rejected its share of a 27,000 tonne quota for 1995 fixed last month by the 15 member Northwest Atlantic Fisheries Organisation (NAFO) and instead set itself a higher limit.

The EU Commission has called for a special NAFO meeting by March 20 to try and resolve the crisis.