When working with Terraform's AWS provider, many developers encounter a confusing situation where explicitly declared credentials in provider blocks seem to be ignored in favor of local AWS configuration. Let's examine why this happens and how to enforce credential usage.

The critical misunderstanding lies in the separation between backend and provider authentication. The error message you're seeing originates from the backend configuration, not the provider block. When Terraform initializes, it needs to authenticate twice:

1. Backend authentication (for state operations)
2. Provider authentication (for resource operations)

Here's what's actually happening in your configuration:

# This ONLY affects provider authentication
provider "aws" {
  access_key = var.access_key
  secret_key = var.secret_key
  region     = var.region
}

# This requires SEPARATE authentication
terraform {
  backend "s3" {
    bucket = "example_tf_states"
    key    = "global/vpc/us_east_1/example_state.tfstate"
    region = "us-east-1"
  }
}

To make Terraform use specific credentials for both backend and provider operations, you have several options:

Option 1: Environment Variables

The most secure approach is using environment variables:

export AWS_ACCESS_KEY_ID="your_access_key"
export AWS_SECRET_ACCESS_KEY="your_secret_key"
export AWS_DEFAULT_REGION="us-east-1"

Option 2: Backend Configuration

For Terraform v0.12.17+, you can add credentials directly to the backend:

terraform {
  backend "s3" {
    bucket         = "example_tf_states"
    key            = "global/vpc/us_east_1/example_state.tfstate"
    region         = "us-east-1"
    access_key     = "your_access_key"
    secret_key     = "your_secret_key"
    skip_credentials_validation = true
  }
}

Option 3: Shared Credentials File

Create a dedicated credentials file and reference it:

provider "aws" {
  region                  = "us-east-1"
  shared_credentials_file = "/path/to/credentials"
  profile                 = "customprofile"
}

For production environments, we recommend:

• Using IAM roles for EC2 instances
• AWS SSO for local development
• Temporary credentials via AWS STS
• Never committing credentials to version control

For Terraform v0.11.7 (your current version), consider upgrading to access newer authentication methods. The backend credential issue was particularly prevalent in pre-0.12 versions.

When working with Terraform's S3 backend, many engineers encounter a puzzling behavior: despite explicitly declaring AWS credentials in the provider block, Terraform still seems to require credentials from ~/.aws/credentials. This isn't a bug - it's actually by design in Terraform's authentication chain.

Terraform handles backend initialization separately from provider configuration. The backend needs authentication before any providers are initialized because it needs to access the state file first. This creates a chicken-and-egg situation:

# This requires auth before providers are initialized
terraform {
  backend "s3" {
    bucket = "tf-states"
    key    = "prod/network.tfstate"
    region = "us-east-1"
  }
}

# These credentials can't help with backend initialization
provider "aws" {
  access_key = var.aws_access_key
  secret_key = var.aws_secret_key
  region     = var.region
}

For production environments, consider these approaches:

1. Environment Variables:
export AWS_ACCESS_KEY_ID="AKIA..."
export AWS_SECRET_ACCESS_KEY="..."

2. Shared Credentials File (~/.aws/credentials):
[default]
aws_access_key_id = AKIA...
aws_secret_access_key = ...

3. EC2 Instance Profile (for AWS deployments):
# No credentials needed - IAM role attached to instance

If you absolutely must declare credentials in code (not recommended for security reasons), use a partial configuration with terraform init:

# main.tf
terraform {
  backend "s3" {
    bucket         = "tf-states"
    key            = "prod/network.tfstate"
    region         = "us-east-1"
    dynamodb_table = "tf-locks"
  }
}

# Then initialize with:
terraform init \
  -backend-config="access_key=AKIA..." \
  -backend-config="secret_key=..."

Never hardcode credentials in Terraform files. Instead:

• Use Terraform Enterprise/Cloud for remote execution
• Leverage AWS STS for temporary credentials
• Implement CI/CD pipeline with injected secrets