The Chilean forward is approaching the final 12 months of his current deal and has yet to agree extended terms, with reports suggesting he wants £200,000-a-week to sign on.
Sanchez is Arsenal’s top goalscorer this season and widely regarded as one of the very best players in the Premier League. But Nicholas says the 28-year-old has no right to hold the club to ransom and has launched a blistering attack on Gunners chiefs for their handling of the situation.
Speaking exclusively to talkSPORT, the former Arsenal striker said: “When I played you probably got told a month before you were getting a new contract.
You had to work and earn that right and if you got a new contract without winning things you thought, ‘well, this is a result’.
“These people at Arsenal now don’t even get close to winning the title. You are talking about jumping from £120,000-a-week to £200,000-a-week for Sanchez. Sell him.”
Nicholas, who scored 54 goals in 184 matches in his five years at Arsenal, added: “Arsenal had great credit in the footballing market because they would not go over the threshold of £100,000 a week.
“They sold Robin van Persie to Manchester United because he wanted £200,000-a-week. Arsenal had values at that time. Arsenal don’t have any values and any soul that says to these players,’ you can go’.
“Henry, Vieira, they were the greatest players Arsenal ever had and now you have got players who are not going to be anywhere close to the greatest and we are keeping them and they are holding us to ransom.
"They should have said to Sanchez two months ago, 'are you signing?' If he said 'no, I'm not going to sign', then he should be sold in the summer. They should isolate the players.
"They don't have values now. They have lost their credibility.”
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