Its for the transportation network within the VPN tunnel for BGP peering.
For example, when you configure a VPN device, for example Cisco ASA with BGP over IPsec it uses APIPA addressing within the tunnel to establish a BGP session. I suspect that the same would work with Meraki S2S.
Try to add the Azure reserved APIPA space to the VNG setting called Azure APIPA BGP IP address
Then add that APIPA range to your IPsec subnet config in Meraki as well and see where that gets you.
Configure BGP for VPN Gateway: Portal - Azure VPN Gateway | Microsoft Learn
Note that i have not done this with Meraki before, but its worth a try 🙂
MLL