Currently I am unable to patch or install additional packages on SLES 12 SP3 Instances which are located in a VPC which only has Internet access through Amazon Linux based Squid proxies which we do not manage.

Security restrictions do not permit direct Internet access from our VPC. When our instances are configured with Proxy Server settings in /etc/sysconfig/proxy we get the following error messages:

Refreshing service 'SMT-http_smt-ec2_susecloud_net'.
Problem retrieving the repository index file for service 'SMT-http_smt-ec2_susecloud_net':
Location 'http://smt-ec2.susecloud.net/repo/repoindex.xml?cookies=0&credentials=SMT-http_smt-ec2_susecloud_net' is temporarily unaccessible.
Check if the URI is valid and accessible.
Refreshing service 'cloud_update'.
Location 'http://smt-ec2.susecloud.net/repo/SUSE/Updates/SLE-Module-Adv-Systems-Management/12/x86_64/update/repodata/repomd.xml?credentials=SMT-http_smt-ec2_susecloud_net' is temporarily unaccessible.
Abort, retry, ignore? [a/r/i] (r):

Is there any way to make this set-up work?

If I attempt to force a new cloud registration I end up with only the nVidia-Driver-SLE12-SP3 repository as available.