What is the right course of action?

You were right with answer 1: you must let the blue car turn first.

The key rule here is “right before left” (Rechts vor Links) at an intersection without priority signs or traffic lights. The blue car is coming from your right, so it has priority over you.

The motorcycle is coming from your left. Since you have priority over traffic from the left, the motorcycle must wait for you. That’s why you do not let the motorcycle go before you.

So the correct order is: blue car first, then you, then the motorcycle.