City wants to tie the La Masia graduate to a new deal, but a lack of consistent opportunities at the Etihad has seen him turn down their contract offer.
The defender wants a return to Barcelona and the Spaniards want him back as well, however, their finances have been wrecked by the coronavirus pandemic.
His is out of a contract next summer, Barcelona wanted to sign him in the last transfer window, but they couldn’t stomp up the £13.5 million that City wanted.
They are unlikely to still pay for his signature in the January transfer window as well, and the report says this has opened the door for them to lose him to Arsenal.
Arteta worked with him for more than three years as the assistant manager of Manchester City and the Spaniard wants to bring him to the Emirates.
Arsenal will, however, struggle to bring him in next month because they already have a surplus of centre backs.
Next summer, the likes of David Luiz and Sokratis Papastathopoulos will be out of a contract, so they would leave space in the team and on the club’s wage bill for a new signing.