istio ingress controller fails to assign public ip because of 'Microsoft.Network/publicIPAddresses/join/action'

Question

I'm trying to create an AKS service with static pre-defined public IP. For that I'm using terraform.

The important parts

resource "azurerm_public_ip" "public_ip" {
  allocation_method   = "Static"
  location            = azurerm_resource_group.rg.location
  name                = "${local.resource_name_prefix}-PublicIp1"
  resource_group_name = azurerm_resource_group.rg.name
  sku = "Standard"

  tags = local.common_tags
}

resource "azurerm_kubernetes_cluster" "aks" {
  location            = azurerm_resource_group.rg.location
  name                = "${local.resource_name_prefix}-aks"
  resource_group_name = azurerm_resource_group.rg.name

  default_node_pool {
    name    = "system"
    vm_size = "Standard_DS2_v2"
    vnet_subnet_id = azurerm_subnet.app_subnet.id

    upgrade_settings {
      max_surge = "30"
    }
    
  }
  
  network_profile {
    network_plugin = "kubenet"
    load_balancer_sku = "Standard"
    load_balancer_profile {
      outbound_ip_address_ids = [ azurerm_public_ip.public_ip.id ]
    }
  }

  role_based_access_control {
    enabled = true
  }

  service_principal {
    client_id     = var.appId
    client_secret = var.password
  }
  
}

the virtual network + subnets are also pre-defined.

now when trying to install istio using istioctl install, istio-ingressgateway Loadbalancer is failing on

{
  "error": {
    "code": "LinkedAuthorizationFailed",
    "message": "The client 'xxxxx' with object id 'xxxx' has permission to perform action 'Microsoft.Network/loadBalancers/write' on scope '/subscriptions/xxxx/resourceGroups/xxx_rg/providers/Microsoft.Network/loadBalancers/kubernetes'; however, it does not have permission to perform action 'Microsoft.Network/publicIPAddresses/join/action' on the linked scope(s) '/subscriptions/xxx/resourceGroups/xxx-rg/providers/Microsoft.Network/publicIPAddresses/xxx-PublicIp1' or the linked scope(s) are invalid."
  }
}