It's both - it's clearly at least partly for moral reasons that they're even in the negotiation that they need leverage for.

How should he have acted instead?

It’s possible Dario is a bad person pretending to be good and Sundar is a good person only pretending to be bad. People argue whether true selflessness exists at all or whether it’s all a charade.

But if the “performance” involves doing good things, at the end of the day that’s good enough for me.

Standing up to the US government has real and serious sequence. Peter Hegseth threatened to make Anthropic supply chain risk, meaning not only is Anthropic likely dropped as Pentagon’s supplier, but also risk losing companies doing business with the military as customers, such as Boeing or Lockheed Martin. Whatever tactic you think he is doing, that’s potentially massive revenue lost, at the time they need any business they can get.

Don't be evil.

The dispute seems to be specifically about safeguards that Anthropic has in its models and/or harnesses, that the DoD wants removed, which Anthropic refuses to do, and won’t sign a contract requiring their removal. Having implemented the safeguards and refusing their removal are actions, not “literally words”.

It’s a contract dispute. Contracts are more than just talk.

While it is true that DoW could try to bypass the contract and do whatever they want, if it were that easy they wouldn’t be asking for a contract in the first place.

This action is far more likely to land him in prison than complying with the pentagon

The chance is zero. This won't be deployed in countries that he'd want to visit anyway and would extradite him to The Hague.