What is the right course of action?

Your answer is fully correct because, according to German traffic rules, when you want to turn left, you must give way to oncoming traffic going straight or turning right, as well as allow any cyclists who are crossing or turning on your left.

In this situation:

- You have to allow the cyclist to turn because cyclists have priority if they are already on the main road or crossing from your left.
- You also have to allow the blue car to pass straight because it is oncoming traffic going straight or turning right, which has the right of way before you turn left.

Option 3 is incorrect because the blue car does not have to allow you to turn; you must yield to them.

Understanding this rule ensures safe and smooth traffic flow when turning left at intersections where cyclists and oncoming vehicles are present.