What is the right course of action?

Your answer is fully correct.

According to German traffic rules, the sign indicates that you are on a priority road, so you have the right of way. The intersection sign below it shows the side road is on the right, meaning vehicles coming from the right (the blue vehicle) must yield to you.

Therefore, you must allow the blue vehicle to pass first because it is coming from the right at a side street; however, since you are on the priority road and turning left (as indicated by your turn signal), you may proceed before the green vehicle, which is coming from the main road but must wait because you're turning left across its path.

The green vehicle on the left does not have priority over you because you are on the priority road and signaling left, so you can make your turn before it.

This explains why you must allow the blue vehicle to pass first, then you may turn before the green vehicle. Understanding priority roads and right-of-way at intersections marked with these traffic signs is important for correct behavior in such situations.