This is the last stage of the Earth Cradle route, in which you fight the Machinary Children (Anthuz, Thurisuz). The guy with blue hair is Egret Feff and the boy with crazy hair is Uruz (the last Machinary Child).
Sanger finally declares he is the Blade of Sophia ("Ware koso wa Sophia no tsurugi nari!") - Sophia Nate - and Wodan performs his impressive final attack against Feff and his Machinary Children.
Is it me or Sanger appears to be singing when he says "waga zankantou ni, tatenu mono nashi" here? That isn't the normal tone of his voice.