[BUG] claudeCode.environmentVariables workspace scope regression in v2.1.193 — setting greyed out with scope warning

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Starting in v2.1.193, claudeCode.environmentVariables can no longer be set at the workspace scope (.vscode/settings.json). The setting is greyed out in the editor and displays the warning:

"This setting can only be applied in user settings in local window or in remote settings in remote window."

This is a regression — the same configuration worked correctly at workspace scope in v2.1.191.

As a result of the env vars not being applied, the extension falls back to Claude AI authentication and ignores the configured Bedrock models entirely.

Impact: Users who need per-workspace Bedrock (or Vertex/Foundry) configuration cannot use .vscode/settings.json for this purpose. The only workaround is user-level settings, which applies the same AWS profile/region globally across all workspaces — undesirable in multi-account or multi-project setups.

What Should Happen?

claudeCode.environmentVariables should be configurable at workspace scope (.vscode/settings.json), as it was in v2.1.191. The extension should:

• Apply the env vars from workspace settings
• Show Third Party as the Auth method in Account & Usage
• Show the configured Bedrock inference profiles in the Switch model... picker

Error Messages/Logs

Steps to Reproduce

1. Install Claude Code extension v2.1.193
2. Open a workspace in VS Code
3. Add the following to .vscode/settings.json:

"claudeCode.environmentVariables": [
  { "name": "CLAUDE_CODE_USE_BEDROCK", "value": "1" },
  { "name": "AWS_REGION", "value": "ap-northeast-1" },
  { "name": "AWS_PROFILE", "value": "my-bedrock-profile" },
  {
    "name": "ANTHROPIC_DEFAULT_SONNET_MODEL",
    "value": "jp.anthropic.claude-sonnet-4-6"
  },
  {
    "name": "ANTHROPIC_DEFAULT_HAIKU_MODEL",
    "value": "jp.anthropic.claude-haiku-4-5-20251001-v1:0"
  }
]

1. Observe the setting is greyed out with the scope warning message
2. Open the Claude Code panel and check Account & Usage and Switch model...

Expected:

• Setting is applied at workspace scope
• Account & Usage → Auth method shows Third Party
• Switch model... shows the configured Bedrock inference profiles (jp.anthropic.claude-sonnet-4-6, jp.anthropic.claude-haiku-4-5-20251001-v1:0)

Actual:

• Setting is greyed out with: "This setting can only be applied in user settings in local window or in remote settings in remote window."
• Account & Usage → Auth method shows Claude AI instead of Third Party
• Switch model... shows standard Claude Code models instead of the configured Bedrock inference profiles

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.1.191

Claude Code Version

2.1.193

Platform

AWS Bedrock

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_