Is there any paper that describes the capability of SIM applets?
I want to know what SIM applets can do and what permissions they have.
Have a look at the 3GPP 31.111 document which describes all the proactive commands which an STK applet can use (as far as the ME supports them).
Another interesting API is the SIMalliance Open Mobile API which allows applications installed in the phone to communicate with the (U)SIM/SE applets (as long as the phone supports this API).