"The Central Authority's inability to seek the Orders requested is a result of the operation of European Union law and the differences in the sanctions regimes applicable to Iran in the EU and the U.S.", a Gibraltar government statement said.
However, the United States opposed the release of the tanker and has since launched a warrant to seize it, claiming that the tanker had ties to Iran's Islamic Revolutionary Guard Corps (IRGC), which the U.S. has designated a terrorist organization.
Commander of the Iranian Army's Navy Rear Admiral Hossein Khanzadi announced on Sunday that Iran is not meant to escort Grace 1 but if need it is ready to safeguard the oil tanker to Iranian territorial waters.
The US made the last-minute request on Friday, a day after Gibraltar lifted its detention order against Grace 1.
The initial impounding of the Grace 1 sparked a diplomatic row that escalated when Tehran seize a British-flagged oil tanker in the Gulf two weeks later. Its previous name, "Grace 1", had been painted over.
Authorities in Gibraltar said Sunday that, unlike in the US, the Iran's Revolutionary Guard is not designated a terrorist organization under European Union, U.K. or Gibraltar law.
The unsealed court documents argued that Iran's Islamic Revolutionary Guard Corps are the ship's true owners through a network of front companies.
Tehran said it was ready to dispatch its naval fleet to escort the tanker - now renamed the "Adrian Darya-1" - if required.
The Gibraltar port and law enforcement agencies had detained the supertanker and its cargo during an operation conducted by the Royal Gibraltar Police (RGP), Customs and Port Authority with the support of British Royal Marines. Analysts had said the Iranian ship's release by Gibraltar could see the Stena Impero go free.
The two vessels have since become pawns in a bigger game, feeding into wider hostilities since the United States a year ago pulled out of an global agreement to curb Iran's nuclear programme, and reimposed economic sanctions.