WCF hosted on IIS (uses MSMQ) cannot connect to SQL server

I'm moving existing test environment (hosted on Azure) into new BizSpark Azure subscription. In old setup, I had API, WCF and SQL Server hosted on same VM. The new configuration is:

• API and WCF on VM1 (subscription 1)
• SQL Server on VM2 (subscription 2)

API works 100%, everything is good.

WCF cannot connect to the database (hosted on VM2).

The exception is:

System.Data.Entity.Core.EntityException: The underlying provider failed on Open. ---> System.Transactions.TransactionManagerCommunicationException: Communication with the underlying transaction manager has failed. ---> System.Runtime.InteropServices.COMException: The MSDTC transaction manager was unable to push the transaction to the destination transaction manager due to communication problems. Possible causes are: a firewall is present and it doesn't have an exception for the MSDTC process, the two machines cannot find each other by their NetBIOS names, or the support for network transactions is not enabled for one of the two transaction managers. (Exception from HRESULT: 0x8004D02A)
   at System.Transactions.Oletx.ITransactionShim.Export(UInt32 whereaboutsSize, Byte[] whereabouts, Int32& cookieIndex, UInt32& cookieSize, CoTaskMemHandle& cookieBuffer)
   at System.Transactions.TransactionInterop.GetExportCookie(Transaction transaction, Byte[] whereabouts)
   --- End of inner exception stack trace ---
   at System.Transactions.TransactionInterop.GetExportCookie(Transaction transaction, Byte[] whereabouts)
   at System.Data.SqlClient.SqlInternalConnection.GetTransactionCookie(Transaction transaction, Byte[] whereAbouts)
   at System.Data.SqlClient.SqlInternalConnection.EnlistNonNull(Transaction tx)
   at System.Data.SqlClient.SqlInternalConnection.Enlist(Transaction tx)
   at System.Data.ProviderBase.DbConnectionInternal.ActivateConnection(Transaction transaction)
   at System.Data.ProviderBase.DbConnectionPool.PrepareConnection(DbConnection owningObject, DbConnectionInternal obj, Transaction transaction)
   at System.Data.ProviderBase.DbConnectionPool.TryGetConnection(DbConnection owningObject, UInt32 waitForMultipleObjectsTimeout, Boolean allowCreate, Boolean onlyOneCheckConnection, DbConnectionOptions userOptions, DbConnectionInternal& connection)
   at System.Data.ProviderBase.DbConnectionPool.TryGetConnection(DbConnection owningObject, TaskCompletionSource`1 retry, DbConnectionOptions userOptions, DbConnectionInternal& connection)
   at System.Data.ProviderBase.DbConnectionFactory.TryGetConnection(DbConnection owningConnection, TaskCompletionSource`1 retry, DbConnectionOptions userOptions, DbConnectionInternal oldConnection, DbConnectionInternal& connection)
   at System.Data.ProviderBase.DbConnectionInternal.TryOpenConnectionInternal(DbConnection outerConnection, DbConnectionFactory connectionFactory, TaskCompletionSource`1 retry, DbConnectionOptions userOptions)
   at System.Data.SqlClient.SqlConnection.TryOpenInner(TaskCompletionSource`1 retry)
   at System.Data.SqlClient.SqlConnection.TryOpen(TaskCompletionSource`1 retry)
   at System.Data.SqlClient.SqlConnection.Open()
   at System.Data.Entity.Infrastructure.Interception.InternalDispatcher`1.Dispatch[TTarget,TInterceptionContext](TTarget target, Action`2 operation, TInterceptionContext interceptionContext, Action`3 executing, Action`3 executed)
   at System.Data.Entity.Infrastructure.Interception.DbConnectionDispatcher.Open(DbConnection connection, DbInterceptionContext interceptionContext)
   at System.Data.Entity.SqlServer.DefaultSqlExecutionStrategy.<>c__DisplayClass1.<Execute>b__0()
   at System.Data.Entity.SqlServer.DefaultSqlExecutionStrategy.Execute[TResult](Func`1 operation)
   at System.Data.Entity.Core.EntityClient.EntityConnection.Open()
   --- End of inner exception stack trace ---
   at System.Data.Entity.Core.EntityClient.EntityConnection.Open()
   at System.Data.Entity.Core.Objects.ObjectContext.EnsureConnection(Boolean shouldMonitorTransactions)
   at System.Data.Entity.Core.Objects.ObjectContext.ExecuteInTransaction[T](Func`1 func, IDbExecutionStrategy executionStrategy, Boolean startLocalTransaction, Boolean releaseConnectionOnSuccess)
   at System.Data.Entity.Core.Objects.ObjectQuery`1.<>c__DisplayClass7.<GetResults>b__5()
   at System.Data.Entity.SqlServer.DefaultSqlExecutionStrategy.Execute[TResult](Func`1 operation)
   at System.Data.Entity.Core.Objects.ObjectQuery`1.GetResults(Nullable`1 forMergeOption)
   at System.Data.Entity.Core.Objects.ObjectQuery`1.<System.Collections.Generic.IEnumerable<T>.GetEnumerator>b__0()
   at System.Data.Entity.Internal.LazyEnumerator`1.MoveNext()
   at System.Linq.Enumerable.FirstOrDefault[TSource](IEnumerable`1 source)
   at OCS.Web.DocumentGeneration.Ticketing.TicketGenerators.TangibleTicketGenerator.GenerateDocuments(GenerateDocumentsRequest generateDocumentsRequest) in c:\Projects\OCSSvrBase\OCS.Web.DocumentGeneration.Ticketing\TicketGenerators\TangibleTicketGenerator.cs:line 103
   at OCS.Web.DocumentGeneration.Ticketing.TicketGenerator.GenerateDocuments(GenerateDocumentsRequest generateDocumentsRequest) in c:\Projects\OCSSvrBase\OCS.Web.DocumentGeneration.Ticketing\TicketGenerator.cs:line 111

I've spent more than a week to resolve this. I've been trying:

1. to setup Firewall and MSDTC on a way that I found on a few different posts
2. to create exactly the same settings as I have on LIVE (LIVE configuration is the same, with one difference, both VMs are under the same Azure subscription)

Any idea where I need to look at? My guess is that I'm missing something around MSMQ settings. This is just a guess, based on a fact that my API works perfectly fine (hosted on same VM1).

Thanks in advance!