Guardiola said: "We were so smart to pick him up and now the other clubs want him. I've said many times, he's an incredible person, a good manager, work ethic, that is why he is with us.

"He's talking with Arsenal so I don't know what is going to happen."

Arsenal's pursuit of their former midfielder became public when Gunners chief executive Vinai Venkatesham was pictured leaving the Spaniard's home in the early hours of Monday morning.

Guardiola said Arteta had told him about the meeting, and that he would not be trying to influence the 37-year-old's decision.

The City boss said: "It happens. Last season we had (physio) Lee Nobes and he went to Liverpool. And now it has happened with Mikel, teams want him.

"He knows exactly what we want but at the end it's his decision. It's personal. Nobody is here if they don't want to be here. If he wants to be here it is because we decided we want to work together three years ago. What happens now, I don't know.

"The organisation of the club is always live, it doesn't always stay the same, what works today might not work tomorrow. The people today maybe won't be here tomorrow."

Guardiola was speaking for the first time since City were drawn against Real Madrid in the last 16 of the Champions League.

"It's an incredible test for us," said the Catalan. "The draw was the draw – the king of this competition.

"Of course it's positive because we are one of the best 16 in Europe and that's good news. People think that it's not enough and of course every team wants to go through and do it better.

"If you want to go through you have to play these teams sooner or later, you can do it now or in the quarters or semis or finals. In this competition there are teams of quality: English teams, Spanish teams, even German teams.

"We want to prepare well for two months to arrive as good as possible, get the injured players back. Now, we have one feeling but maybe in February we will have a better feeling.

"They have more experience in this competition – this type of players play this game many, many times – but for us it will be an incredible confidence in my team to do a good two games."

Guardiola is also excited about facing Real manager Zinedine Zidane.

"I dream to play with him," he added. "When I left Barcelona I wanted to play with him at Juventus but it did not happen.

"I don't speak much with him – maybe three or four times. But my first impression is of an incredible person. I admire him. It will be a real pleasure to see him."

It is the second time in as many seasons that City will have faced League One Oxford in the Carabao Cup having beaten them 3-0 last term on their way to defending their title.

Guardiola said: "(They have) the same manager. They've changed a little bit to how they set up last season but they play quite similar in terms of attacks.

"One game away, anything can happen. We'll try to go there and win and get into the semi final."