Using Shell script variable in SQL Script

I have an initializing sql script for PostgreSQL database. In the script, instead of hardcoding the name of the user, I wish to use the variable stored in my shell file. However I am not able to do it.

this is the shell file:

export
DB_HOST="xxx"
DB_PORT="xxx"
DB_USER="xxx"
DB_NAME="xxx"

psql -U $DB_USER -d $DB_NAME -v user1=$DB_USER -f initialize_postgres.sql

and i want to use it in the sql script which looks like the following:

GRANT
SELECT,
INSERT,
DELETE,
UPDATE ON ALL TABLES IN SCHEMA public TO :'user1';

GRANT USAGE,
SELECT ON ALL SEQUENCES IN SCHEMA public to :'user1';


CREATE FUNCTION save_property (IN prop varchar(50), IN val varchar(500)) RETURNS void AS $$
UPDATE properties SET "value"=val WHERE id=prop;

INSERT INTO properties (id, value)
    SELECT prop, val
    WHERE NOT EXISTS (SELECT 1 FROM properties WHERE id=prop);
$$ LANGUAGE sql;

GRANT EXECUTE ON FUNCTION public.save_property(varchar(50),varchar(500)) TO :'user1';

this is the error that is shown to me when I run the pipeline: