Olazabal accused the Irishman of "excessive gardening" when he repaired a pitch mark as the pair contested a singles match at the 2002 Seve Trophy between Continental Europe and Britain & Ireland.
Harrington cannot gain an automatic place in the team for next month's Ryder Cup clash with the United States but he is leading after the first round of the Barclays Classic in New York and is a candidate for one of the captain's two wildcard picks.
"If people believe that (old issue) is interfering with my judgement, they are completely wrong," Olazabal told reporters at the Johnnie Walker Championship on Thursday.
"If that was the case I would be failing as a captain."
Olazabal, winner of the U.S. Masters in 1994 and 1999, repeated a previous comment he made about the Irishman when he said Harrington needed to finish high on the Barclays leaderboard to merit inclusion in his team for the Sept. 28-30 match in Illinois.
"He is as close to a pick as some other players, not closer than other players, it is as simple as that," the Spaniard added. "If you look at the points list, he is well back there isn't he?
"I said before that he needed a win or to finish in the top three to make the team but I don't think that's what it's all about.
"He is an experienced player obviously but at the moment he has not been able to deliver, period - simple as that," added Olazabal who looks likely to miss the cut at Gleneagles after following an ugly opening 78 with a second round 69, three under.
The Spaniard's 10 automatic Ryder Cup choices will be known after the final round on Sunday, with the two wildcard picks being named a day later.
Olazabal's predecessor as captain, Colin Montgomerie, said he was involved in a similar situation ahead of the previous edition of the biennial team event in 2010.
"People tried to say there was some personal issue between Ian Poulter and I but when you are on tour for 20 years things do happen between players," said Montgomerie.
"To me that should be completely put aside and the best team should be picked ... and I am sure Olazabal thinks the same," added Montgomerie after shooting a 68 to move into title contention on 140, four under par.