City boss Roberto Mancini has been linked with a swoop for 26-year-old Baines is wanted at Eastlands, with talk of a possible cash-plus-player deal involving Wayne Bridge.
However, it has now been suggested that Gunners boss Arsene Wenger could try and make a counter offer to take the England international to the Emirates Stadium.
Everton will be keen to keep hold of key man Baines, but with finances tight at the Merseyside club, boss David Moyes has been informed that he will have to sell before he can then move to bring in any of his own transfer targets.
This could lead to an interesting scramble between City and Arsenal as the two clubs bid to bolster their respective back lines for Champions League football next term.
Rangers centre-back Russell Martin will miss Scotland's friendlies against Costa Rica and Hungary through injury.
Jonathan Walters is ready to continue his Republic of Ireland career when he returns to full fitness, according to Martin O'Neill.