For Azure VMs encrypted with customer-managed encryption keys in the Azure Key Vault, full VM restores (from streaming backups only) complete successfully; however, the customer-managed encryption key settings or disk encryption sets (DES) are not applied to the destination VM. You must manually apply the DES settings to the destination VM.
Procedure
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Power off the destination VM.
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Go to the Azure portal.
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On the Disks blade, select the disk that you want enabled with disk encryption.
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On the disk page, select Encryption.
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In the Encryption type dropdown box, select Encryption at-rest with a customer-managed key option.
The Disk encryption set dropdown box appears.
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Select the disk encryption set you want to enable on the disk.
Note
Verify that you have a disk encryption set (DES) present on the location you are restoring the VM to.