I think, since he is shy, and the quiet withdrawn type of guy, that he feels comfortable with her, i honestly dont think he would put hes arm around her while you are there if he has "more" in mind.
I understand your "jealousy" about this, i wouldnt like it either. Even though im not a jealous type at all, it would bother me.
Talk to him, and tell him straigh out, you dont like what hes doing.
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