[BUG] New VS Code Extension does not recognize ANTHROPIC_BASE_URL and shows login screen

[nadzinski]

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?

My company uses Claude Code with an LLM behind LiteLLM. To make that work we set ANTHROPIC_BASE_URL to our LiteLLM url. We do this in /etc/claude-code/managed-settings.json, like so:

   "env": {
        "ANTHROPIC_BASE_URL": "<URL>",
        ...
    }

With the new VS Code Extension (since at least 2.0.0), it just immediately shows us an anthropic login screen. There is no clear way to force it to use a different LLM backend.

Consequently the new VS Code Extension is completely broken for us.

What Should Happen?

We can use the new VS Code extension with a custom ANTHROPIC_BASE_URL

Error Messages/Logs

Steps to Reproduce

1. Set the ANTHROPIC_BASE_URL env var to a dummy value in ~/claude/settings.json as above
2. Open the new VS Code extension
3. Instead of trying to connect to the ANTHROPIC_BASE_URL, the extension always shows an anthropic login screen.

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

1.0.127

Claude Code Version

2.0.1

Platform

AWS Bedrock via LiteLLM

Operating System

macOS

Terminal/Shell

VS Code Extension

Additional Information

No response