Background: I recently graduated from college with a Software/Computer Engineering degree. Right after my degree I started working at a consultant firm (about three months ago). Our firm usually gets projects in the Automotive, MedTech or Defense industries. The last mentioned includes working with weapons. I told my then-to-be boss during my job interview that I am reluctant to work in the defense industry and working with weapons directly is a big 'no-no'.
At the time my boss mentioned that a lot of his employees share the same view and that it wouldn't be a problem since "the demand for computer engineers outweighs the supply".
Fast forward to today and it turns out that most of our clients don't want to hire a green 'straight-from-school' consultant. The only projects that don't have this prerequisite are those involving weapons!
I am noticing that my boss is getting more frustrated by the day (not with me personally, we get along just great) since he's under pressure from his bosses to make a profit. My boss has told me, when I expressed reluctance to working with a weapons project:
"If you don't take on this project, we might have to fire you. You can only pick and choose depending on what's on the table. Right now this is it. If enough time passes and a newly hired consultant isn't put on a project, then his/her employment is terminated since keeping him/her on without a project can't be justified."
I know that if I start with the project it will be a step ladder for future projects, but I won't give up my morals. However, I really like my company and get along great with the people here (other than the weapons aspect I can see myself doing a long-term career here).
When I tell him "No, I won't take on this project" how can I make sure that my relations stay good (either as a continued employee or when I need him for future reference for my next job application)?
Edit: What I need help with is mitigating the bad blood that can come between me and my boss due to my decision. I want to make sure that my utmost respect for my boss is mutual (and in the long run beneficial for future work - no matter if it's at the present company or another).