Nicholas is holding the "Successful Spy" Action Card. This card allows him to steal 2 random action cards from 1 opponent. This Action Card is played as an action and could be used as his turn. He just needs to decide which opponent to choose.
There's nothing about the "Diplomacy" agreement imposed by Melissa earlier in this round that prohibits Nicholas from using this card against her. She has 9 Action Cards.
Steve has 7 Action Cards. Since we know Steve has had to discard as he added cards, to stay within the 7 card limit, he's probably had to be more selective about which Action Cards he actually is holding. Nicholas uses this reasoning as his basis for choosing Steve as his opponent for the "Successful Spy" Action Card.
Nicholas plays and discards the "Successful Spy" Action Card and randomly chooses two Action Cards from Steve's hand. He randomly drafted the "Direct Hit!" and "Cultural Crisis" Action Cards from Steve. Since he has now exceeded the 7 card limit he must discard one Action Card. Nicholas discards the "Cultural Crisis" Action Card he just picked.
Nicholas has played an Action Card for this turn.