Two separate issues are preventing connectivity:

1. Workstation-to-Application: The on-premises workstations cannot reach the cloud because the IPsec tunnel is down. Firewall 1 shows its tunnel (ipip0) to Firewall 2 is DOWN and configured for IKEV2. Firewall 2 shows its corresponding tunnel (ipip2) is configured for IKEV1. This IKE version mismatch prevents the tunnel from establishing.
2. VM-to-Application: The cloud VMs (in subnet 10.3.9.0/24) cannot reach Application A (in subnet 192.2.1.0/24) because the Application NSG has an explicit rule to block traffic from Source: 10.3.9.0/24 to Destination: 192.2.1.0/24.

Microsoft Azure Documentation: "Azure network security groups overview." (Official documentation explaining how NSG rules are processed. A Deny rule [shown as block] with a higher priority (lower number) will override an Allow rule for the same traffic pattern).

Microsoft Azure Documentation: "VPN Gateway configuration settings." (Vendor documentation detailing IKEv1 and IKEv2 parameters for site-to-site VPNs, specifying that "IKE versions on both on-premises VPN devices and Azure VPN gateways must match").

IEEE Xplore: "Security Analysis of IKEv1 and IKEv2 protocols." (Academic analysis confirming IKEv1 and IKEv2 are distinct protocols and are not interoperable. A successful security association requires both peers to negotiate using the same version). DOI: 10.1109/IEMCON.2018.8614744