You have to look at the opponents for what they are, and the abilities they have.
The fact that a Balrog is a Maia and a Dragon is not has nothing to do with the battle; it’s only relevant in the afterlife, when the battle is over.
Not necessarily, a snake will always be victorious over a mouse.
The Letters of JRR Tolkien - #144: To Naomi Mitchison
The
Balrogs, of whom the whips were the chief
weapons, were primeval
spirits of destroying fire,
chief servants of the primeval Dark Power of the First Age.
In any ancient military construct the strongest soldiers were always the leaders.
The Silmarillion - Of the Coming of the Elves and the Captivity of Melkor
...their hearts were of fire, but they were cloaked in darkness, and terror went before them; they had whips of flame. Balrogs they were named in
Middle-earth in later days.
And in that dark time Melkor bred many other monsters of divers shapes and kinds that long troubled the world...
The "other monsters of divers shapes" would likely include
dragons. The following passage is of enormous interest to me for various reasons:
The Letters of JRR Tolkien - #153: To Peter Hastings (draft)
But if they 'fell', as the Diabolus
Morgoth did, and started making things 'for himself, to be their Lord', these would then 'be' ... real physical realities in the physical world ... But whether they could have 'souls' or 'spirits' seems a different question;
and since in my myth at any rate I do not conceive of the making of souls or spirits, things of an equal order if not an equal power to the Valar, as a possible 'delegation'. I have represented at least the
Orcs as pre-existing real beings on whom the
Dark Lord has exerted the fullness of his power in remodelling and corrupting them, not making them.
Here Tolkien is discussing the quintessential concept to most myth and fantasy based on religious premise that created
creatures cannot themselves create, they can only twist and mar that which already is in existence. He concedes that even if Morgoth were capable of 'making' things, they could never match the power of the Valar through delegation (delegation in this context meaning the passing of power or will from one being to another which Tolkien in another letter explains is inherent in myth -
Sauron's power passed into
the Ring and Morgoth did the same through his Ring -
Arda). I am and never will be JRR Tolkien, but I firmly believe that if I ever got the opportunity to ask him this question I know what the answer would be. If we substitute Valar for Maia or possibly
Ainur in the above quote then the dragons could never match the power of the Ainur (or Maia). I know that's speculative, but I believe what Tolkien in this passage is fundamentally driving at is the impregnable concept that sub-creation cannot create and thus cannot match that which already is; and you'll see exactly why below.
Fëanor's
Silmarils were works of art but were simply imitations of light of the Two
Trees. The Two Trees did not 'create' their own light but generated the light already present in the world after the Flame Imperishable was kindled in the Void:
The Silmarillion - Of the Beginning of Days
In that guarded land the Valar gathered a great store of light...
Myths Transformed sheds even greater light on the subject aforementioned.
The History of Middle-earth X: Morgoth's Ring - Myths Transformed: VIII
Melkor corrupted many spirits - some great, as Sauron, or less so, as Balrogs. The least could have been primitive (and much more powerful and perilous) Orcs; but by practising when embodied procreation they would (cf. Melian) [become] more and more earthbound, unable to return to spirit-state (even demon-form), until released by death (killing) , and they would dwindle in force.
Here Tolkien acknowledges that through perpetuation of physical form, the "corrupted Maia" eventually became earthbound to the point that they could not exercise the greatness of their power, which includes even a demon-form:
a form which the Balrogs constantly possessed. Subtextually Tolkien evinces that even a demonized form is greater than the physical form possessed by dragons.
The History of Middle-earth X: Morgoth's Ring - Myths Transformed: X
For Morgoth had many servants,
the oldest and most potent of whom were immortal, belonging indeed in their beginning to the Maiar; and these
evil spirits like their Master could take on visible forms.
And there you have it: Maiar are crucial to the discussion as they are greater in being than artificial sub-creations such as Orcs and Dragons. Thus Balrogs are more powerful than Dragons; but I am not going to leave it at that, oh no...
The Silmarillion - Of the Return of the Noldor
He was yet young and scarce half-grown,
for long and slow is the life of the dragons.
Dragons conversely, were mortal creatures and thus of lesser potency (or power - they have the same meaning). Even the
Quenya form of Balrog -
Valarauko - means '
Demon of Might'. Another salient point is that Balrogs didn't appear to re-produce and thus did not confine themselves to physical forms. In determining the number of Balrogs left, Christopher Tolkien notes that this note of JRRT's was discarded and the number of Balrogs was therefore quite small:
The History of Middle-earth XI: The War of the Jewels - The Grey Annals 230
The Balrogs were still at this time conceived to exist in large numbers... '[Melkor] sent forth on a suddent a
host of balrogs' - at which point my father noted on the typescript of AAm: 'There should
not be supposed more than say 3 or at most 7 ever existed'...
From CT's notes it appears that Tolkien changed his mind and considered that only 3 or 7 at most existed. I understand the fault in that logic, but it is irrefutable that he considered the number to be far smaller as he developed
The Silmarillion.
Thus this argument:
Fire Resistant: Smaug-Yes / Balrog-Yes
Ability to Fly: Smaug-Yes / Balrog-No
Projectile Flames: Smaug-Yes / Balrog-No[...]
[...]Well, it’s obvious the Balrog has a substantial disadvantage. Also, why did Morgoth wait so long to attack during the Siege of
Angband? Couldn’t he have just sent Gothmog out there to break the siege? Probably, but he wasn’t confident with that strategy. He instead wanted to be sure he was going to have the victory; so he patiently waited for his deadliest
weapon to mature;
Glaurung! And it worked; the Battle of Sudden Flame was devastating

. And personally, I think
Smaug would have no problem taking out Glaurung if circumstances arose.
So, do I think a Balrog could take Smaug?....not a chance in hell.
Becomes irrelevant. The Balrogs were simply smaller in number than the dragons, they were however, corrupted and immortal Maiar, the "most potent" and "chief servants" of Morgoth
Bauglir, whereas dragons, including Glaurung and as...
Ancalagon was the greatest of the Dragons; Glaurung was simply the first...
...they are nought but cheap imitations of created beings twisted and marred by Morgoth and consequently "dwindled in force". Despite Smaug being the last of the great dragons, he was still part of the brood and therefore less in potency, might and power, than that of the lowliest Balrog.
As for Ancalagon being the greatest Illuin, you are absolutely correct; but Ancalagon's achievements were far outshadowed by that of his ancestor Glaurung and therefore it is my own personal contention that Glaurung remains the first and the greatest of all dragons, which is another topic of discussion.
Towards Smaug, that quote tells us little. Sauron could have used a balrog with terrible effect, too. Does it tell us that Smaug was easy to control? No. Actually, he seems to me to be more along the lines of an
Ungoliant. Independent. The pathetic balrog hiding out in
Moria used to work for Mel, so he probably knew that Sauron was his right hand Ainur type thing. I don't see why reviewing Sauron's resume would stop him from helping the guy out. Smaug had a good thing going by himself, though. He seemed plenty to content to stay where he was, and Sauron wouldn't have been able to force him into helping out. Of course, we have Sauron's vaguely defined ability to draw evil. It is too vaguely defined for me to worry about Smaug falling under its spell. With little information on how intelligent balrogs were, I wouldn't know who would be more likely to be swayed by it.
True but nowhere does Tolkien express that point of view, and
Gandalf potentially concludes that Smaug as an agent of Sauron may be a certainty:
Unfinished Tales - The Quest of Erebor
Often I said to myself: "I must find some means of dealing with Smaug...
We must disturb Sauron's plans. I must make the Council see that."
If
Olórin considered that a possibility and used the quest for the
Arkenstone as an ulterior motive to overcome Smaug, then I would indeed infer there was a strong possibility that Smaug would be recruited into Sauron's service.