During the Council of Elrond in The Fellowship of the Ring, Gloin explains that a messenger from Sauron came to the Dwarves and asks them to get a Ring from the Hobbits.

"As a small token only of your friendship Sauron asks this," he said: "that you should find this thief," such was his word, "and get from him, willing or no, a little ring, the least of rings, that once he stole. It is but a trifle that Sauron fancies..."

Ultimately the Dwarves refuse to help but had they actually went and found the Ring it seems that they would have quickly discovered that it was much more than a "trifle" and would not have simply handed it over to Sauron.

Assuming that the Dwarf who found it didn't "go Gollum" and vanish (which would just mean that you now have a missing Dwarf instead of a missing Hobbit), this would mean that the Dwarves had the One Ring.

Did Sauron just assume that he could defeat the Dwarves even if they had the Ring?

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    Sauron is in my opinion more worried to the fact that he could not locate the area where the ring was kept. It's a kind of strategy in my opinion. If the dwarves get the ring what will happen, by fear or tribute the dwarves return it to Sauron or keep the ring. Add the surveillance from the ring-wraiths and the second option is also a win, because them Sauron would know where he could concentrate his power. It's not a total victory but an improvement in both situations. – Nuno Freitas Dec 20 '12 at 12:15

It is unlikely that the Dwarves could have used the Ring. As Elrond says in "The Council of Elrond":

"Its strength... is too great for anyone to wield at will, save only those who have already a great power of their own. But for them it holds an even deadlier peril. The very desire of it corrupts the heart. Consider Saruman. If any of the Wise should with this Ring overthrow the Lord of Mordor, using his own arts, he would then set himself on Sauron's throne, and yet another Dark Lord would appear."

That is, the only people in Middle-Earth who would actually be strong enough to overthrow Sauron with the Ring are the Wise -- i.e., wizards and Elf-lords. Everyone else, including whatever Dwarf ended up with it, would be unable to claim it, and would eventually be subjugated by it (though the Ring itself would try to convince them otherwise).

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    What of the lack of effect the 3 rings for the dwarves had on the dwarves? Does that not imply some ring-mmunity? – AncientSwordRage Dec 2 '12 at 0:48
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    @Pureferret: Maybe? I don't think it implies the ability to use the ring, though (so perhaps Sauron would still have to conquer the dwarven kingdoms, but he wouldn't find it more difficult because of the ring). It's probably also true that the One is harder to resist than the Seven. Note that hobbits are exceptionally ring-resistant, and Frodo still succumbed after a year or so of carrying the One around with him... – Micah Dec 2 '12 at 1:21
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    @Pureferret: The dwarven rings were not entirely without effect. In the Silmarillion, in "Of The Rings of Power and the Third Age" it says: "[The Dwarves] used their rings only for the getting of wealth; but wrath and an over-mastering greed of gold were kindled in their hearts, of which evil enough after came to the profit of Sauron." So while the effect was less direct, the rings still acted upon them. – sugaredlightning Dec 2 '12 at 19:43
  • @Micah Although to be fair, he was close to the very source of the ring's power, and its destruction. I think the ring was stronger and Mordor, and it was surely more desperate. Frodo never had a chance. – kleineg Dec 15 '14 at 14:47

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