Quite old but also still relevant as it hasnt changed from the cloud providers pint of view and the thread is misleading from a modern context.
The above thread has a misconception of routable vs link local. Routable means that the ip block is propagated via routing protocols or made reachable via the router itself to anything connected to it. ie a client on a lan segment being able to reach a 169.254.0.0/16 address via the router not its own broadcast discovery over its local interface/
This is not the same as having a 169.254.0.0 /30 subnet on a vti interface. Only the two routers in the tunnel could see these addresses so it is therefore arguably compatible with rfc3927 as it is entirely on link. After all a vti interface is just a NIC, its just a virtual one over a tunnel vs a physical one.
More still it is a better address space to use than the CGNAT netblocks as these can still clash on internal networks especially when multiple organizations are at play, where as rfc3927 addresses could not clash unless the same address spaces were used on the same router. This would obviously be trivial to fix and totally preventable