There are a few possibilities here;
1. Sanchez fully intends to sign a new contract at the Arse, and is just holding out for more money.
2. He intends to see out his contract, then leave on a free next year for one last big signing on fee & and top wages.
3. The Arse want to cash in, and are just using our interest to push up the price
4. He likes what we are offering (assuming there is an offer on the table), and wants to come to City.
Now, we all know Arsey Whinger would be loathed to sell him to a rival, so in reality it is highly unlikely he will grace us with his presence this season, unless he seriously digs his heels in. I suppose it all depends if the Arsenal Board see it the same way as Whinger; they'd be stupid to let him go on a free.
Incidentally, anyone know the latest odds? I'm at work and can't look at gambling sites.