The bank's representatives have been in talks with Ilham Aliyev, the president of Azerbaijan, and other officials on a multi-million-dollar project to clean an area about the size of Malta.

Peter Thomson, a senior bank official for the region, said: "This legacy of environmental damage extends over a century and reflects the history of oil production in Azerbaijan.

"A clean-up of this size hasn't been undertaken anywhere."

The clean-up would focus on oil-soaked areas in the Absheron peninsula, Azerbaijan's most densely populated region and the location of the capital Baku, where oil has been produced since the country was part of the Russian empire in the 19th century.

Baku is surrounded by ageing, noxious oil fields and "nodding donkey" pumps are a common sight even inside the city.

Some of the fields are still active but Azerbaijan now produces most of its oil in offshore facilities that have been built by Western oil companies since the break-up of the Soviet Union.

Thomson said: "The situation in Azerbaijan is unusual in that it's a very high concentration of oil-related pollution in a very small area."

The world bank said it would potentially provide a loan of about $50million for "capacity building" and an initial clean-up but also expected funding from the government, which is making large profits from the current oil boom. 

Thomson said that some funds could be earned through the recovery of oil in damaged areas.