Iran and Iraq are building up their missile forces as peace talks between the two Persian Gulf War foes drag on in Geneva with no sign of a breakthrough.

Iraq this month displayed new home-produced missiles which can reach Iran's major population centers.Iranian sources this week confirmed the latest deal with major arms supplier China for more medium-range missiles, satellite surveillance and pilot training.

At stake is the balance of power between the two main Persian Gulf military powers after fighting in their eight-year war halted last August with a U.N.-brokered ceasefire.

"Peace between the two sides depends upon the maintenance of a balance of power. If one side gets too far ahead, war becomes possible," said a European-based Iranian political analyst.

Iraq has overwhelming superiority in the air. Figures produced by the London-based publication Military Balance give it a 10-to-1 advantage in combat aircraft, leaving Iran's ground and naval forces stripped of air cover and vulnerable.

Following the first Iranian frontline success in 1982, Iraq opened a new stage in the war through bombing and missile attacks on cities which sapped Iranian civilian morale.

Iran could not reply in kind until March 1985, but since then it has developed a missile force which could eventually overtake Iraq, the experts and officials said.

Iraq displayed its al-Hussein and al-Abbas missiles, which appear to have a range up to 530 miles. It also has about 50 medium-range Scud-B and Frog-7 missiles, and 270 assorted Soviet-made SAMs, the Military Balance said.

The mainstay of Iran's medium-range missile force is the Soviet-designed Scud-B and an improved version developed with Chinese and North Korean help, according to published reports.

Two weeks ago, Iran's acting armed forces chief Ali Akbar Hashemi Rafsanjani visited a missile research center and said he was encouraged by the latest tests.

"I was mainly interested to see the progress in missiles," said Rafsanjani.

He said last year: "One of the war's blessings is the way our forces acquired the construction technology and learned the use of different kinds of missiles."

The latest Chinese deal further enhances this capability by providing Scud spares.

An important part of the deal was initial agreement for a communications and reconnaisance satellite placed in orbit by a Chinese rocket in the early 1990s.