This bug was fixed in the systemd with 234-2ubuntu6 - Ignore failures to
set Nice priority on services in containers.

---
systemd (234-2ubuntu2) artful; urgency=medium

  * Ignore failures to set Nice priority on services in containers.
  * Disable execute test on armhf.
  * units: set ConditionVirtualization=!private-users on journald audit socket.
    It fails to start in unprivileged containers.
  * boot-smoke: refactor ADT test.
    Wait for system to settle down and get to either running or degraded state,
    then collect all metrics, and exit with an error if any of the tests failed.

 -- Dimitri John Ledkov <x...@ubuntu.com>  Wed, 02 Aug 2017 03:02:03
+0100

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https://bugs.launchpad.net/bugs/1576341

Title:
  systemd in degraded state on startup in LXD containers

Status in lvm2 package in Ubuntu:
  Fix Released
Status in nfs-utils package in Ubuntu:
  New
Status in open-iscsi package in Ubuntu:
  Fix Released
Status in systemd package in Ubuntu:
  Fix Released

Bug description:
  The ubuntu:xenial image shows 'degraded' state in lxd on initial boot.

  $ lxc launch xenial x1
  $ sleep 10
  $ lxc file pull x1/etc/cloud/build.info -
  build_name: server
  serial: 20160420-145324

  $ lxc exec x1 systemctl is-system-running
  degraded

  $ lxc exec x1 -- systemctl --state=failed
    UNIT                          LOAD   ACTIVE SUB    DESCRIPTION
  ● dev-hugepages.mount           loaded failed failed Huge Pages File System
  ● iscsid.service                loaded failed failed iSCSI initiator daemon 
(iscsid)
  ● open-iscsi.service            loaded failed failed Login to default iSCSI 
targets
  ● systemd-remount-fs.service    loaded failed failed Remount Root and Kernel 
File Systems
  ● systemd-sysctl.service        loaded failed failed Apply Kernel Variables
  ● lvm2-lvmetad.socket           loaded failed failed LVM2 metadata daemon 
socket
  ● systemd-journald-audit.socket loaded failed failed Journal Audit Socket

  LOAD   = Reflects whether the unit definition was properly loaded.
  ACTIVE = The high-level unit activation state, i.e. generalization of SUB.
  SUB    = The low-level unit activation state, values depend on unit type.

  7 loaded units listed. Pass --all to see loaded but inactive units, too.
  To show all installed unit files use 'systemctl list-unit-files'.

  ProblemType: Bug
  DistroRelease: Ubuntu 16.04
  Package: open-iscsi 2.0.873+git0.3b4b4500-14ubuntu3
  ProcVersionSignature: Ubuntu 4.4.0-18.34-generic 4.4.6
  Uname: Linux 4.4.0-18-generic x86_64
  ApportVersion: 2.20.1-0ubuntu2
  Architecture: amd64
  Date: Thu Apr 28 17:28:04 2016
  ProcEnviron:
   TERM=xterm-256color
   PATH=(custom, no user)
  SourcePackage: open-iscsi
  UpgradeStatus: No upgrade log present (probably fresh install)

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