Manchester City believe their hopes of signing Pepe could rest on whether Real Madrid bring in Gareth Bale, sources told ESPN.
City have registered an interest in the defender as manager Manuel Pellegrini looks to find a fourth centre-back for his squad. But Real manager Carlo Ancelotti said a month ago that Pepe is not for sale and City have not made a bid for the Portugal defender.
However, they feel the situation could change either if Pepe asks to leave the Bernabeu - which is unlikely - or if Real need to raise funds for a marquee signing such as Bale.
Pepe remains former Real manager Pellegrini’s top target to strengthen his back four but the Chilean will not make a signing for the sake of it if he proves unavailable.
The club are determined to learn the lessons from last summer when they failed to secure the players former manager Roberto Mancini wanted and four of their five arrivals struggled.
With Matija Nastasic, the one triumph from their August 2012 spending spree, injured and Kolo Toure having joined Liverpool, they will begin their Premier League campaign with only two fit senior specialist central defenders, Vincent Kompany and Joleon Lescott.
But Nastasic could be fit for next week’s game at Cardiff and Pellegrini, whose four main summer signings were secured comparatively quickly, will not be afraid to end the transfer window without further acquisitions if Real are intent on keeping Pepe.
Pellegrini was non-committal about further additions in his Friday press conference, saying: "We will see. Maybe not."